From the one-liner treasure trove of one of the 20th century’s most-American of consumer insight savants, George Carlin, comes a typical sage philosophical inquiry: “Have you ever noticed that anyone driving slower than you is an idiot, and anyone going faster than you is a maniac?”

In his book, “Mindwise: How We Understand What Others Think, Believe, Feel, and Want,” author Nicholas Epley uses Carlin’s ingenious poke at road rage psychology to illustrate a universal habit of the human mind, naïve realism. This trait—which comes in its own distinctly American flavor—makes us believe that we’re looking at the outside world objectively, as it is in fact, not as a construct inside our mind.

Housing’s recovery, such as it is, offers striking examples of how naïve realism plays a part, leading us to look at industry trends in the first half of 2014, and question the intelligence of roughly half of the players in the sector and the sanity of the other half.

For instance, it’s widely held right now that new-home builders raised prices in the past 18 months, so much and so quickly that sticker shock—along with upwardly drifting mortgage interest rates—sucked the momentum right out of the market. So, why, one asks, would home builders be such idiots or maniacs as to kill a fragile fledgling recovery before it became fully viable?

Yes, home builders have raised prices in particular communities where demand has held up despite the hikes. But there are two reasons this “observation”—that home builders raised prices too high, too soon—fails to explain the dynamics of the market now.

One reason is contextual and the other is behavioral. We say “prices on new homes are soaring,” but compared with what? Compared with prices during the first-time buyer backed days of 2010 and 2011, yes, median prices are up a lot. Compared with the prices Wall Street investor funds picked up tens of thousands of distressed properties from late 2011 through the first half of 2013, yes, prices have taken quantum leaps.

So, in the context of owner-occupier buyers seismically replacing investor purchasers of homes, the absolute number of properties sold levels off or goes down. At the same time, the percentage of homes sold at the higher end of the price spectrum goes up, based on the cash and credit access of the individual buyers. But the degree to which price increases meter or even stifle pace truly can be known only on a neighborhood-by-neighborhood basis.

In some cases, home builders deliberately “cadence” pace. Why? (Are they the idiot who drives too slowly?) Well, if demand at a price point is too strong for a particular division’s capacity to profitably and carefully meet it, then raising prices may be the way to calibrate supply and demand.

Prices are the wrong point of focus as a way to explain the fits-and-starts of recovery to date. For the largest percentage of would-be buyers, rising prices have not been a big factor because they can’t pay, whatever the price. This is the group of prospects needed to kick-start and sustain any and all housing recoveries—the ones who’d be given access to borrowed money to buy a house. For them, price is important, but payment power is more important. If they can’t get a loan, a $100,000 price tag, or an $850 a month mortgage payment, means nothing.

If more people can get into the market who only are able to pay less for homes, then we’d soon be writing about how fast home builders are lowering their prices to speed up the pace and test labor and materials capacity. (They’d then turn into the maniac drivers.)

Right now, though, that’s a big “if.” Jobs, incomes, student debt deals, and credit access to mortgage loans will determine whether and when entry-level buyers will enter the housing market. Until then, naïve realism will make most people believe it’s greedy home builders charging too much money for their houses that’s killing housing’s mojo.

Given a choice between naïve realism and the American dream, which will you take?