The American Dream of owning a house has become a nightmare for many people and may further tear our country apart.

The U.S. housing market is slipping into chaos, with more to come. The lack of availability of new housing and the drop in the number of people who are selling existing houses has created a dangerous nationwide shortage, resulting in unprecedented increases in property values.

The U.S. is short 5.24 million homes, an increase of 1.4 million from the 2019 gap of 3.4 million, according to new research by Realtor.com.

Owning your own home is undeniably part of the American Dream. But surveys show that many millennials (ages 26 to 41) and the oldest Gen Z (up to age 25) believe that either they own a home right now or they never will. They believed that even when mortgages were at a historically low interest rate, under 3%. Today, it tops 5%. Between 1949 and 2018, mortgage debt as a percentage of GDP grew from 15% to 80%.

Here’s a frightening question: How many baby boomers would be able to afford the house they’re living in today?

Say goodbye to the would-be homeowners’ historic practice of saving specific amounts of money for a down payment. Sadly, home prices have been rising faster than ever, far exceeding real wage increases and destroying that strategy.

Many homeowners made more money from home appreciation of their houses in the last couple of years than their personal incomes.

Nationwide, home prices have risen over 30% in the past two years. In 2021, home values jumped over 20% in most of Colorado. The fastest appreciations came in Pueblo, 24%; Colorado Springs, 22% and Grand Junction, 22%, as people looked for alternatives to the housing prices in the Denver metro area.

Median housing prices in our area shot up again in April, setting record highs. According to Real Estate Services LLC (IRES), Boulder’s median resale price for detached homes was $1.675 million in April — up from $1.5 million in April 2021 and from $1.4 million in March 2022.

In a particularly cruel way, the value of many homes in Boulder County rose because of the tragic loss of supply following the Marshall Fire in late December, which destroyed about 1,000 homes. Removing all those houses from the market has increased prices dramatically in the last four months alone — 20% to 30% in many instances.

How did we get here?

The nation had a lack of commitment in the 1990s and 2000s to meet our future housing demands.

The Great Recession of 2008 caused banks to stop lending money to builders/developers. The latter were unwilling or unable to borrow money to develop lots — particularly single-family ones. The whole financial system was frozen in place, it seems.

The coronavirus pandemic, labor problems and supply-chain failures have lowered the housing supply even more, driving up costs and delaying the building process.

America’s housing crisis is approaching a disastrous state. Even before COVID-19 struck, we already had a shortage of about 7 million affordable homes. The phrase “affordable homes” formerly referred to housing for lower-income families. But now, the definition must be expanded to include middle-income housing.

In the past two years, Americans who own their own homes have gained more than $6 trillion in single-family housing wealth — and that excludes rental owners.

Those homeowners earned that money by doing nothing other than owning their own house. They didn’t work for it; they didn’t have to pull themselves up by their bootstraps.

Never have so many Americans gained so much equity in their houses in so little time, and this is inseparable from the housing affordability crisis.

Only 65% of American households own their own homes and have been able to share in this windfall.

In the past, homeownership has long been accepted as a major component in our ability to accumulate wealth, particularly for retirement. Many homeowners  have tapped into their home equity to pay for their children’s educations, health care or family emergency. But if they’re forced to rent, there’s no home equity to tap.

Benjamin Keys, a Wharton School of Business professor, worries that all this housing wealth will only reinforce to families that they have few alternatives to building wealth other than home ownership.

Surveys say the vast majority of Americans still aspire to live in single-family homes, especially those leaving cities for suburban or remote living because of crime, poor schools and extreme congestion. What happens when these people cannot work remotely again and are expected to return to their offices to work? So much for living the dream of working at home and spending more time in your mountain chalet or at the beach.

Americans have seen their net worth increase dramatically, either through the stock market or housing appreciation, or both. But many Americans did not participate in either of these practices, leading to further inequality between the rich and the poor.

Will the housing market ever return to affordability? Can we have our own version of the American Dream by providing them the same opportunities we had?

The American housing crisis is a disaster. Let’s treat it like one.

Jim Martin can be reached at jimmartinesq@gmail.com.