How the 2 biggest status symbols of the American Dream came to pose the greatest risk of an inflation crisis

• Owning a house and a car have symbolized the American Dream since the end of WWII.
• But these markers of 20th-century prosperity are posing the 21st century's greatest inflation risk.
• Economists see soaring home and car prices as the main things that could turn transitory inflation permanent.
• See more stories on Insider's business page.

The American Dream has long paired ideals – opportunity, liberty, and equality – with some material items. A TV. A white picket fence. A yard.

Material prosperity has been part of the equation ever since the US emerged as an economic superpower after World War II in 1945. When rations and restrictions lifted, consumers spent wildly from their wartime savings on everything from cars to homes, with homeownership rates increasing by 21% from 1940 to 1960.

As Larry Samuel, author of "The American Dream: A Cultural History" and founder of consultancy firm Age Friendly Consulting, previously explained to Insider, that era was when homeownership and education became the primary paths to achieving a prosperous ideal grounded in "the good life" – enjoying and signifying financial stability with a nice house in the suburbs and the postwar consumer trappings, with cars the paramount expression.

No passenger cars were manufactured in the US from 1942 through 1945 because of wartime mobilization, and their chrome-heavy suburbanized heyday of the 1950s revolutionized American culture

It was during this era that "the domestic and consumerist American way of life emerged as our civil religion," Samuel writes. A variety of powerful economic forces during the 1950s made it relatively easy for white citizens to realize that version of the American Dream, he added.

When the pandemic turned the world upside down, Americans fled cities in pursuit of that same ideal. But amid that chase, two of the American Dream's biggest status symbols – the house and the car – morphed into harbingers of a potential economic nightmare.

American Dream status symbols could revive runaway inflation

Surging inflation has displaced the coronavirus recession as the predominant economic worry amid the economy reopening, as a wave of pent-up consumer demand ran up against widespread supply shortages and bottlenecks, leading businesses to jack up prices.

By May, a popular gauge of broad price growth had leaped to its highest level since 2008. Conservative economists and lawmakers have raised fears that, unless the government reins in its spending, the US risks repeating the crippling spiral of runaway inflation from the 1970s.

Homes and cars account for much of the overshoot. Prices of used cars and trucks rocketed 7.3% higher in May alone, accounting for one-third of the month's overall price increase. And that was after a record-setting 10% jump the month prior. After stripping out used vehicle sales, the Consumer Price Index still sits below pre-pandemic levels.

Homes have seen an even longer surge in prices. Sales boomed throughout the pandemic as record-low mortgage rates sparked a buying spree, and by May, home-price inflation had hit its fastest rate since 2005, according to the S&P CoreLogic Case-Shiller price index.

These months of decade-high inflation, driven largely by home and car prices, are now the "principle risk" to the economic recovery, Fannie Mae said in a Wednesday report. Unless bottlenecks are quickly alleviated and price growth cools, inflation that's been largely deemed temporary by the Federal Reserve could plunge the US into a new economic crisis, the company's Economic and Strategic Research Group said.

"If a stronger underlying inflation trend develops, due to expectations rising or persistent labor market tightness, there is risk of a wage-price spiral," the group added.

Morgan Stanleysounded a similar note in May, warning that "shelter inflation," or apartment rental prices, could lead inflation to normalize above the Fed's long-term target of 2%. In other words, expensive housing could be the thing that turns a transitory bout of inflation permanent.

Soaring home and car prices can bleed into other categories. As Americans brace for pricier goods, they tend to demand higher wages. Businesses then lift prices and spark a cycle of elevated price growth throughout the economy.

As both have become even more coveted during the pandemic, they could play an outsized role in shaping the 21st-century US economy.