We Americans seem to be in the process of becoming wildly over-housed. Since 1970, the size of the average home has increased 55% (to 2,330 square feet), while the size of the average family has decreased 13%. Especially among the upper crust, homes have more space and fewer people. We now have rooms specialized by appliances (home computers, entertainment systems, and exercise equipment). The long-term consequences of this housing extravaganza are unclear, but they may include the overuse of energy and, ironically, a drain on homeowners’ wealth.

By and large, the new American home is a residential SUV. It’s big, gadget-loaded, and slightly gaudy. In 2001, about one in eight homes exceeded 3,500 square feet, which was more than triple the average new home in 1950 (983 square feet). We have gone beyond shelter and comfort. A home is now a lifestyle. Buyers want spiral staircases and vaulted ceilings. In one marketing survey by the National Association of Home Builders, 36% of buyers under age 35 rated having a “home theater” as important or very important.

Of course, home-ownership (now a record 69%) symbolizes success in America. The impulse to announce more success by having more home seems to span all classes. In his book “Luxury Fever,” Cornell University economist Robert Frank noted that Microsoft co-founder Paul Allen built a 74,000-square-foot house. According to Frank, that roughly equaled the size of Cornell’s entire business school, with a staff of 100. Frank sees a “cascading effect” of imitation all along the social spectrum. The super-wealthy influence the wealthy, who influence the upper-middle class – and so on. People constantly enlarge their notion of “what kind of a house does a person like me live in.”

Another cause of this relentless upsizing is that the government unwisely promotes it. In 2005, about 80% of the estimated $200 billion of federal housing subsidies consists of tax breaks (mainly deductions for mortgage interest payments and preferential treatment for profits on home sales), reports an Urban Institute study. These tax breaks go heavily to upscale Americans, who are thereby encouraged to buy bigger homes. Federal housing benefits average $8,268 for those with incomes between $200,000 and $500,000, estimates the study; by contrast, they’re only $365 for those with incomes of $40,000 to $50,000. It’s nutty for government to subsidize bigger homes for the well-to-do.

But otherwise, why shouldn’t Americans buy what they can afford? No good reason. The trouble is that freedom doesn’t confer infallibility. With hindsight, some homeowners may regret sinking so much money into ever-grander houses. One possible problem is future operating costs. Suppose electricity or natural gas prices rise because (for example) new power plants or terminals for liquefied natural gas aren’t approved.

A harder question is whether bigger homes might lose value. Say what? Gosh, we’re in the midst of the greatest real estate boom in U.S. history. Since 2000, home values have risen 55% to nearly $18 trillion, says the Federal Reserve. Americans increasingly believe that they can’t lose by investing more in their homes: They can enjoy themselves and make a pile.

But booms have a habit of imploding. The latest evidence that cheap credit and speculation have artificially inflated home prices comes from a study by the investment bank Credit Suisse First Boston. It finds that home buying is increasingly driven by purchases of investment properties and vacation homes. In 2004, these buyers accounted for 14.5% of all home sales, up from an average of 7.5% from 1998 to 2002. Cheap credit also abounds. Speculative booms usually end when some speculators cash in or when credit tightens.

Even if home prices don’t collapse, their long-term performance may disappoint. In a new edition of his book “Irrational Exuberance,” Yale economist Robert J. Shiller, who accurately diagnosed the 1990s’ stock “bubble,” examined home prices since 1890. His startling conclusion: After adjusting for inflation, home prices rose only 0.4% annually through 2004. After periods when they’ve outpaced inflation – say right after World War II – home prices slow down. Their recent surge is, by Shiller’s figures, unprecedented. The implication is that prices may soon enter a period (after inflation) of stagnation or decline. That would probably preserve big gains for longtime homeowners, though perhaps not for the 22 million who purchased in the past three years.

As Shiller notes, home prices can’t rise too much faster than average incomes for too long without excluding many buyers from the market. Among home builders, realtors, and economists, the dominant view seems to be that the housing market is basically sound. One way or another, Americans might want to reassess their passion for ever-bigger homes. Do we need to go from SUVs to Hummers? Maybe we should revert to sedans.