Posted by Joseph Y. Calhoun, III

Home prices rose in September according to the Case Shiller index (via WSJ):

U.S. home prices logged their fifth monthly increase in September, according to the S&P Case-Shiller home-price indexes, as prices also rose sequentially in the third quarter.

For the third quarter, the broader S&P Case-Shiller U.S. National Home Price Index, which is only released four times a year, posted an 8.9% decrease from a year earlier. It was up 3.1% sequentially. As of the third quarter, average home prices are similar to what they were in the autumn of 2003.

Most people believe this is a necessary condition for recovery but I am always reluctant to believe that higher prices are a good thing. Buying a house is not investment, but rather consumption regardless of what the government believes. Spending more on houses leaves less for more productive investments and that is not a good thing in the long run. Higher prices are beneficial for existing homeowners who are in debt or banks that have outstanding residential real estate loans. In other words, higher prices help those how acted imprudently in the real estate bubble. Great….