Should We Want Home Prices to Rise?

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)

Miriam Axel-Lute is CEO/editor-in-chief of Shelterforce. She lives in Albany, New York, and is a proud small-city aficionado.


  1. I have read and reread this piece wrestling with questions presented by Miriam. Still I am conflicted on my assessment. The themes and questions raised in this post strtke at the core in our work for housing and community development justice. It calls into questions efforts to reform our work around homeownership and a more radical transformation around equity. I continue to see in my own work in seeking to advocate for at-risk homeowners the impact of negative equity to secure affordable modifications. Negative equity threatens to displace families not only by means of foreclosure but in poor public program designs for example to support housing quality. How do we invest in meeting basic housing code standards never mind healthy housing if some communities want to use having home values exceed the mortgage debt? No doubt, in some markets including some housing markets in RI, rising values could lift some homes to a point of both value to have loan modification feasible or push to make unaffordable to new buyers. There is no simple answer here but a powerful question that calls out for further dialogue and action as we continue in our communities to climb out from the Financial Meltdown of 2007, which continues to shape the housing justice movement across our country.


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