When the housing bubble burst, real estate prices, along with related exchange traded funds (ETFs), plummeted. But many Americans are still unable to afford the price tags on their dream homes.

The cost of land, homebuilding, taxes and homeownership exceeds what many people are able to afford as a result of slow personal income growth and inflation, remarks John F. Wasik for The Huffington Post.

Municipalities also favored upscale home developments since home values fuel property tax revenue that is used for schools and public services.  In between 2002-2005, home prices rose 45% in restricted areas for upscale building, whereas unrestricted areas rose 24%. Homeowners’ costs also increased as more infrastructure, schools and other public services were needed for these new suburbs.

Rather than waiting for foreclosures to abate, inventory to shrink, and financing to loosen up… Wasik points out there may be more problems than we thought.

In Wasik’s book The Cul-de-Sac Syndrome, he notes that the government will have to create incentives to build more affordable housing if homeownership were to increase, find a way to de-link property taxes from funding local services, eliminate tax breaks for mortgage interest and create policies that would make houses more energy efficient to reduce long-term costs.

Currently, housing stocks are still 70% off of their highs.

• First Trust S&P REIT Index (FRI): down 6.6% year-to-date

• Vanguard REIT Vipers (VNQ): down 5.4% year-to-date

John F. Wasik is also Tom’s co-author on iMoney.

For more stories on real estate, visit our real estate category.

Max Chen contributed to this article.

Tags: Asset Class ETFs, ETF Book, FRI, iMoney, Real Estate, REITs, Sector ETFs, VNQ