Last night, I sat at a community meeting where a real estate agent proposed turning three lots into four to develop more $400,000 homes. His "for sale" signs are everywhere in my area, and he just sold a home down the street from me, one the developer had renovated into a carbon copy of my own. Normally, rising prices in one area lead to people moving into other areas, urban pioneers buying fixer-uppers outside the hottest neighborhoods and expanding the range of gentrification. That's not happening now, because these buyers have low credit ratings -- thanks in part to the Great Recession -- and can't get mortgages. Federal Reserve Governor Elizabeth Duke told the Housing Policy Executive Council early this month, in a talk covered by Mortgage News Daily, that mortgage purchase originations remain subdued, because people with low credit scores can't get loans. What's happening, in other words, is that the wealth effect of rising home prices is being concentrated in fewer and fewer hands, just as stock gains are concentrated in fewer and fewer hands. We're becoming a two-class society, with a small number of wealthy investors and a much larger number of increasingly poor people. That's unsustainable from an economic point of view. It may not be a bubble, as Felix Salmon sees it, but history shows that two-tier societies eventually explode into revolution, which is no good for anyone. You run a 19th century economy and you get 19th century outcomes. I'm not interested in my kids doing the full Fantine, are you?
At the time of publication, the author owned his own home, and his mortgage was not underwater. Follow @DanaBlankenhorn This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.