Should We Want Home Prices to Rise?
Posted by Miriam Axel-Lute on June 5, 2015
Over on the media watchdog site FAIR, economist Dean Baker takes Boston Community Capital director Elyse Cherry to task for saying in her recent New York Times op-ed that it is a problem for low-income homeowners for home values to be stuck below pre-bubble levels.
Along with arguing that her stats are just wrong and lower end homes are appreciating just fine unless you bought at the absolute peak of the bubble, Baker calls the idea that low house prices are problematic when so many people struggle with housing unaffordability "bizarre." Higher house prices, he argues, are a "transfer of wealth from future generations to current generations."
Baker's point about the language of the op-ed is a good one, as the first half certain does make it sound like cheap housing is itself the problem, and that is a bit of a head-scratcher in the big picture.
But I think he misrepresents Cherry's conclusions a little—she is describing some real problems that face underwater homeowners and the neighborhoods that have a high concentration of them—those owners often can't afford to either move or stay, and often walk away from their mortgages and homes, or let maintenance and repairs slip, causing spreading problems for themselves and their neighbors. And none of her proposed solutions were aimed at bolstering prices particularly. They were instead all good, solid policies aimed at addressing the actual problems. Principal reduction, considering mortgages in bankruptcy, and making short sales easier and more tax favorable would indeed be far better for everyone than having underwater homeowners get in the black again through rising values.
I would add that shared-equity homeownership, which balances the needs of current and future homeowners, would have deserved a mention as well as a good counter-cyclical tool for moderating these problems in the future (just as it helped its owners avoid it through the recent crisis).
(Side note: Low market values are frequently bemoaned themselves in severely distressed neighborhoods where they are below the cost of taking abandoned houses up to habitable standards, requiring serious and not-much-available subsidy to reclaim. That didn't seem to be quite what either Cherry or Baker were discussing, but it's certainly a real issue.)
What do you think about Baker's assertions? Does a focus on homeownership as a generational wealth-building strategy lead us as a field down a devil's bargain path of bemoaning housing unaffordability on the one hand and cheering it on the other? Does equity built now compensate for expensive housing later? How do we talk about what's best for current and future low-income homeowners, not to mention all low-income people, owners or not, at the same time?
(Photo credit: Flickr user Thomas Hawk, CC BY-NC 2.0)
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Miriam Axel-Lute is editor of Shelterforce and associate director of the National Housing Institute. Her email is miriam at nhi dot org.