Posted by Joseph Y. Calhoun, III

Home prices rose for the third straight month in August according to the Case Shiller index:

The 20 City index was down 11.3% from last year but up 1.2% from July. 17 of the 20 cities in the index showed month over month increases and 19 of the 20 showed an improvement in the annual rates of decline.

So, is this good news? Everyone says it is because the majority of the country is long single family housing, but I have a problem with ever equating higher prices with more prosperity. How is it good news if the things we buy are increasing in price? If we have to spend more on housing won’t that leave less for everything else? More specifically, if we housing costs more doesn’t that mean less available for investment in productive capacity? Isn’t that at least partially what got us in this mess to begin with?

From the perspective of banks and existing homeowners, obviously this is good news but I think we should be careful what we wish for.