WHY DID GEORGE BUSH WIN reelection? One factor that has received little, if any, attention is house prices. President Bush has presided over the largest increase in American home values of any president during the modern era--but potential dangers await as he begins his second term.

ONE OF THE FUNDAMENTAL principles of American political economy during the second half of the 20th century was that Treasury secretaries from New York always produced rallies in the value of the dollar, while Treasury secretaries from Texas produced devaluations. This geographic bias was not an…