The Saturday essay: During last spring and early summer, Britain was in the final weeks of a housing crisis.

During last spring and early summer, Britain was in the final weeks of a housing crisis. It had become a serious political issue, the sort that could make or break careers. Yet suddenly, almost without warning, it was over, or at least forgotten. We had a whole new crisis instead.

Strangely, this source of national angst is also a result of the housing market, but for reasons almost precisely the opposite of those that caused so much gloom in the first half of 2007. Then, credit was cheap and plentiful, but houses were dear and inflating in price at a rate to make a first-time buyer weep. "Affordable homes" was the politicians' cry.

Today, credit is hard to come by and anything but cheap. House prices, though, are collapsing, by 7.6% since April alone according to the Halifax, and by 11% in a year. On paper, the notional gains made by owners over the past 24 months have been wiped out, with an average "loss" of £22,000.

Good news, then, for the younger person struggling to place a foot on the first rung of that magical ladder? A £22,000 price cut is far better, after all, than anything the government could have hoped to achieve last spring. But Britain's housing market does not work - the verb may need revision - like that.

When there are few mortgages to be had, price and availability are almost irrelevant. Approvals have fallen by two-thirds. Even if you discount carnage in the buy-to-let business, most first-time buyers remain where they were before: on the outside looking in, forbidden entry to a club that has come to define prosperity, security and social ambition.

No-one is talking much about them at the moment, of course, even if their plight remains as dire as it was when all the chatter concerned key workers and affordability. The dysfunctional market that drives the "property-owning democracy" - irony has its revenge on all, sooner or later - has turned its attention to the majority. They are still counting their virtual money, but they are subtracting rather than adding.

You could blame financial institutions. Someone should. Recklessness is not actually a criminal offence, but certain banks and their customers would be better off today if a few executives had chosen simple embezzlement rather than collateralised debt obligations, sub-prime lucky bags and madcap borrowing on the retail money markets.

Britain, it is said, has become addicted to debt. True enough. But doesn't that make certain erstwhile lenders the counterparts of pushers? Once upon a time, it was impossible to walk in off the street and borrow an improbable multiple of salary to an amount greater than the value of the house you fancied. Mortgages were rationed. You had to book one, if solvent, save a respectable deposit and wait your turn.

But where was the fun or the profit in that? That's not how housing bubbles are made. That's not the kind of debt that fuels the spending that fuels the debt that makes the corporate world go round. Nor is it the reason why Britain could become obsessed with houses and paper profits capable of outstripping any threat of inflation while keeping personal consumption "healthy".

Chickens roost at home, invariably. A few in the worlds of business and economics are still chanting the magic words "cyclical" and "correction", but when Royal Bank of Scotland can see a £5bn profit become a £700m loss, when Barclays witnesses a 33% collapse in the first-half profits, there are other, earthier terms.

Still, the bankers did not actually put guns to our heads. Nor did they ever forget to include the tiny print explaining how homes can be lost. The last epidemic of negative equity was not so very long ago. In any case, the experts - wisdom when you need it least - now confirm that all those houses on which so much has come to depend were always over-valued.

Some say the difference could be as much as 40%. Optimists hope the fall will not exceed 20% over the next year. Meanwhile, the millions who have reached the end of fixed-term deals have discovered that a renewed arrangement will cost them more, a good deal more, than before. Either way, the boom has defied Gordon Brown and turned to bust.

Strangely, it is now impossible to find anyone who ever believed that the good times would last. It turns out that everyone always knew the market, like the giant edifice of personal debt, was "unsustainable". It seems they talked of little else. Even when sneaking a look at the pocket calculator, they deplored the tawdry national obsession with ever-rising property prices. Other topics will have to be found for dinner parties, among those who can still afford dinner parties.

Perhaps this means we are cured, finally, of the mania, but somehow I doubt it. Last week one of the London papers offered a cheery editorial on the benefits of a burst property bubble and a shift to a "more rational" use of "wealth". We could rent more often, it was said, change jobs more frequently, and cut down on commuting times. The straws were being clutched, one suspects, by someone for whom the problem is merely theoretical.

First, Britain does not save, in any significant sense, and has not done so in years. The family house is, or was, the piggy bank. Secondly, an elite aside, this is a country that has seen one financial support knocked away by the scandal known as the pensions industry. Thirdly, we no longer live in a world that understands job security. Unemployment has already begun to creep upwards. Fourthly, council and social housing is a meagre alternative where it even exists. When Margaret Thatcher's state funeral is complete, they may as well stick a "right to buy" notice on the crypt. Finally, the arcane workings of hedge funds and commodities futures - the new one-way bets for smart money - are sucking away such spare cash as there is in stupendous increases for food and fuel.

A house, for those who possess such a thing, is often a family's last defence, preserved with only the tiniest margin for error. No surprises, then, that in the first six months of the year there were 18,900 repossessions, according to the Council of Mortgage Lenders. We may not have plumbed the depths reached in America, where sub-prime victims have taken to simply throwing away the front-door keys as they leave. But what, as people are likely to ask, is there to prevent it?

The government has already botched stamp duty relief. Even to hint that payment of this absurd tax might be postponed has sent another tremor through the market. Why pay the thing now, if Treasury help is on the way? But culpability runs deeper than that. The obsession with property was never discouraged; quite the opposite. Lending practices were never regulated in any meaningful way. Mr Brown, as Chancellor, did nothing to prick the bubble. Easy credit and released "equity" kept consumer spending going.

So the myth of ownership was fostered, though most people no more own their homes than they own the restaurant in which they buy a meal. Now an old truth is being reasserted. The illusion of wealth is easily created. Hardship can't be concealed.

Capitalism: fun for all the family.