To compensate, homebuyers are borrowing more than ever, before homeownership gets away from them altogether. On average, homeowners have less equity and more debt than in 2000. And more buyers are taking bigger risks, using adjustable rate and interest-only mortgages, which leaves them little wiggle room as interest rates rise or housing values decline.

Nationally, housing prices have gone up 15 percent in the past year, the biggest jump since the hyper-inflationary year 1980. In some sub-markets, such as parts of coastal Florida, they've risen as much as 40 percent. The rising percentage of investor-speculators buying homes -- over 20 percent according to the National Association of Realtors -- is also inflating the bubble.

What made this decade's housing boom possible, of course, was very low interest rates. But that party is ending, and the morning after could be nasty, especially for someone mortgaged to the limits on an adjustable rate loan. A crash, in turn, could depress the larger economy by shrinking people's net worth and purchasing power.

Even so, the story is somewhat less ominous than the stock-market bubble of the late 1990s. Why? Because people don't have to keep their money in stocks, but do have to live somewhere. So demand for housing is less volatile than demand for stocks.

When stocks get over-valued, investors dump shares -- bringing about the very collapse they fear. But when they worry about a drop in housing prices, they don't put their houses on the market and move into tents. They try to ride it out.

So while the stock market can literally lose 20 percent of its value in a day, the housing market is more segmented and corrects more gradually. The pain will be concentrated among recent buyers and those stretched thin with adjustable rate mortgages and home equity loans. Many American homeowners will see their paper wealth decline modestly, stay put, and wait for the next cycle.

But Fed Chairman Alan Greenspan is correct to fret about “froth” in housing prices. Froth is the exact metaphor -- lots of little bubbles, of different sizes, in different regional markets.

While the economy as a whole doesn't experience huge swings in housing prices, more volatile markets do. Florida, California, New York City, Washington, D.C., and to a lesser extent greater Boston, have been through several cycles of housing boom and bust in recent decades.

In Boston, for example, average prices are still rising. But there are early signs of a softening.

For instance, in some affluent Boston suburbs, empty-nesters looking to sell a large family home for a princely sum to finance comfortable retirement are disappointed that they can't quite get their expected price. In some communities, a glut of large homes for sale can sit for months until sellers lower their price.

This is hardly surprising. These are towns where pleasant amenities and good schools attract young families. But how many 35-year-olds with school-age kids can afford a million bucks for a starter house?

Housing is also more costly and volatile than it needs to be for reasons of bad public policy. Alan Greenspan gave us unsustainably low interest rates for a few years, to compensate for a stock-market crash fuelled by earlier bad policies that rewarded speculation. Today, George W. Bush's deficits are causing the Fed to hike rates, maybe more than necessary.

Bush also choked off money for new housing subsidies, making the supply of existing houses more expensive, and forcing homebuyers to go dangerously into hock. The tax code's subsidies are too friendly to speculators and upper-bracket homeowners. With different policies, housing could be more affordable and less volatile.

Still, people do need a roof over their heads. As housing costs have risen, many compensate by taking on roommates, or just spending more of their income on housing. Europe, where land is less plentiful and more costly, pays more for its housing, and we could follow.

In most of the United States, housing is likely to experience something closer to a pause, or a moderate and temporary price drop, rather than a crash. Unlike paper wealth, a home is an investment you can actually use while you wait for it, hopefully, to appreciate. That's why they call it real estate.

Robert Kuttner is co-editor of The American Prospect. This column originally appeared in the Boston Globe.