Yale professor Robert Shiller, author of the new book Finance and the Good Society, says that historically home prices have not been a good financial investment -- they essentially tracked the rate of inflation from 1890 to 1990.

Yet during the housing boom of the 2000s, the mind-set of most Americans was that housing was a great capital-gains-generating investment. I recently asked Shiller, one of the leading thinkers on U.S. housing, how we collectively fell into that illusion. Hear his explanation in the video below, excerpted from my interview with him in front of a live audience at Motley Fool Headquarters. (Running time is 3:51; a transcript is provided below.)