Real estate is always a safe long-term investment because housing prices have historically never fallen nationwide.

The lesson had the authority of recent history behind it. American home prices, measured by the Case-Shiller index, had not fallen nationally since the data series began in 1987. Going further back, the historical record showed that housing in America had been, with occasional local exceptions, a reliable store of value over the long term. Economics teachers, financial advisors, and a culture of homeownership as the foundation of the American dream all reinforced the same message: real estate was safe. Houses were something you could count on.

The reasoning seemed sound. Housing was real, physical and local, unlike the abstract instruments of financial markets. Supply was constrained by geography and regulation. Demand would only grow as the population grew. And for the generation that had watched their parents build equity through three decades of generally rising markets, the lesson was confirmed by lived experience.

The warning signs were visible to those who looked. The economist Robert Shiller had been arguing since at least 2003 that housing prices relative to rents and incomes had reached historically anomalous levels, the ratio of prices to fundamentals had not been this stretched since the Great Depression. The Federal Reserve's own data showed that new mortgage originations were increasingly going to borrowers who had not been verified as able to repay them. The television channels devoted to house-flipping were a cultural indicator. None of this penetrated most classrooms, where the lesson remained: houses always go up.

The national median home price peaked in the second quarter of 2006 and began declining. By 2008 the decline had become a rout. In markets like Las Vegas, Phoenix, Miami, and the suburbs of California, prices fell by 40 to 60 percent from their peaks. Millions of homeowners found themselves underwater, owing more than their homes were worth. Banks holding mortgage-backed securities discovered that the underlying asset, which models had assumed would not fall nationally, had fallen exactly the way models said it couldn't.

The foreclosure wave that followed was the largest in American history. Between 2008 and 2012, banks repossessed approximately four million homes. Entire subdivisions were abandoned. The lesson that housing was the safe investment, the one thing you could count on, had been taught into one of the most destructive financial decisions a generation would ever make.