Ill-advised speculation on U.S. real estate helped set off the global financial crisis. But even after millions of foreclosures and their secondary effects rippled through economies around the world, U.S. homeowners might be making the same mistakes again.

This article was in the Dallas Morning News on Sunday, January 3, 2010, entitled, The Top Stories You Missed in 2009: They may have been overlooked, but these hidden headlines likely to reappear, by Joshua Keating. Joshua Keating is deputy Web editor at Foreign Policy magazine. The essay was adapted from Foreign Policy’s special year-end issue.

I am presenting it on DallasPerspectives in its entirety because I have been concerned that with our ongoing FHA loans and the government’s $8,000 tax credit we are continuing the same actions that led to the housing bubble meltdown of 2008.

Ill-advised speculation on U.S. real estate helped set off the global financial crisis. But even after millions of foreclosures and their secondary effects rippled through economies around the world, U.S. homeowners might be making the same mistakes again.

After suffering their largest month-to-month drop in history, U.S. home prices began to increase again in May. The S&P/Case-Shiller index, a top measure of housing prices in the U.S., rose 3.4% between May and July, with gains in 18 of the 20 cities in index measures. Prices were still 13.3% lower than last year, but that figure was less than expected. The release of this data coincided with other positive indicators, including an increase in existing home sales and home construction. “We’ve found the bottom,” one economist told The New York Times.

But economist Robert Shiller, one of the index’s creators, see the numbers as alarming. Pointing to data showing that most homeowners think their house will increase dramatically in value over the next decade, he worries that “bubble thinking” might be returning.

The government’s solution to the housing crisis might even be encouraging homebuying by people who can’t afford it. The Federal Housing Administration, which backed nearly 2 million mortgages in 2009, saw the share of its loans that are delinquent or in foreclosure rise to nearly 8% in June, and the agency is quickly burning through its reserves for loan losses. A congressional committee has been formed to investigate the losses.