Newspapers and their journalists owe it to readers to avoid getting caught up in the exuberance of the times. That frees them to ask important questions -- regardless of how unpopular those questions might be.

Earlier this week, we reported that local home values dropped about 8.9 percent in the last quarter of 2007, the biggest decline in 20 years. As Star Tribune reporters have dug into the meltdown in the mortgage industry, we have found evidence of straw buyers, outright fraud and speculation that drove home building and prices well beyond rational limits. What's remarkable about the cycle of the housing bubble is how quickly it followed the dot-com bubble.

In both cases, I would argue, many reporters across the country got swept up in the hype and failed to ask enough tough questions. Here are some that should have been asked repeatedly for the last five years:

If the economy is growing at a rate of 3 or 4 percent a year and home values are increasing 10 percent a year (or more in other parts of the country), is this rational? If the government keeps lowering interest rates and encouraging consumers to borrow money and spend patriotically, is it breeding irresponsible spending and personal debt levels? Is it rational to expect any economy to keep growing endlessly when the law of economics suggests a natural cycle of growth and recession? Who is buying all these houses anyway?

On a local level, I believe we bought into the line that there was no real-estate bubble, perhaps because we had never seen one in our generation. Who wants to believe that his or her home might be overvalued? On the other hand, we did do some aggressive reporting early on that should have raised serious flags for anyone paying attention.

More than three years ago, as the housing market was reaching its peak, former staff reporter John Reinan wrote a series of articles called "One Nation Under Debt." In those stories, he highlighted the increasing levels of debts consumers were taking on in their mortgages, credit cards and cars and questioned what would happen when interest rates started rising. Everything he wrote about in that series has started to unfold in the last year as equity in homes has sunk and as credit-card debts have risen. That same year, a team of reporters won national awards for a series of stories exploring how lenders were taking advantage of the poor. One of those stories illustrated how some lenders were putting buyers into subprime mortgages they could not afford.

The following spring, real-estate reporter Jim Buchta and the late Terry Fiedler reported on the local condo boom, showing how many of the condo buyers were speculators or investors and questioning whether the rate of increase in the value of these homes could be sustained. One developer referred to the condo craze as the "dot-condo" phenomenon; buyers told us they were sure the value of their condos would never go down. (Wait: Isn't that what some investors said about tech stocks in the '90s?)

Still, nothing prepared us -- or our readers -- for the fallout we have seen in the last year. Since then, reporters have been trying to figure out how the problem could have been so much worse than any of us realized. The deeper we dig, the more rotten the story looks.

On this piece of the story, reporters have done some important work. James Shiffer, one of our editors, describes a story he thinks shows journalists at their best:

"Star Tribune reporter Pam Louwagie was pounding the sidewalk of a sad street in north Minneapolis, reporting on the epidemic of foreclosures in a block with more of them than anywhere else in Hennepin County. One of the foreclosed houses was owned by Irene Thomas. Database editor Glenn Howatt scrutinized property records and found Irene Thomas listed as the owner of no fewer than 10 houses, all bought within a short period, all listed as her primary residence and all now in the process of being repossessed. Louwagie tracked Thomas down, and she agreed to an interview.

"She described how a man she met in a bar promised her she could make money in real estate. Instead, she found herself engulfed in a scheme in which her good credit was used to buy 10 homes for $2.4 million, most of them sold to her by the same people arranging the loans to pay for them. It was a classic "straw buyer" scheme, experts told us, in which inflated appraisals and bogus information on loan documents are used to fleece unsuspecting lenders.

"Over several weeks, Louwagie and Howatt used a combination of high-tech reporting and old-fashioned tenacity to track down and interview the elusive parties to the transaction. The story, published June 10, described how property records showed Universal Mortgage Inc. of Brooklyn Park had been at the center of a web of transactions where a small group of investors, including several Universal employees, bought rental properties and quickly resold many at above-market prices. After reading about the story in the Star Tribune, Hennepin County Attorney Mike Freeman assigned his investigators to the case. In December, a Hennepin County grand jury indicted five people for racketeering and theft by swindle -- including every Universal employee Louwagie and Howatt identified as being involved in Irene's real-estate deals. The indictment read like a retelling of the June 10 story."

Remarkably, it's a type of fraud that has been repeated over and over in our metro area and around the country as too many builders, lenders, bankers, owners and investors tried to ride to the top of the housing bubble. Fraud, speculation and sloppy lending standards were so abundant that you have to wonder how this could have gone on for so long without more of us realizing that huge swaths of the market were engulfed in a giant pyramid scheme.

Could more aggressive reporting have prevented this? As the good times were rolling, I'm not sure it's a story anyone really wanted to hear. But having already seen the dot-com bubble burst just a few years ago, we as journalists should have learned to be more skeptical about easy money and a little more adamant about questioning a story line that seemed too good to be true.