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Justin Fox

Curbing Our Enthusiasm Over Rising Home Prices

A thriving housing market isn't so great if you're the one who can't afford to buy anymore.
Another housing boom.

Another housing boom.

Photographer: Justin Sullivan/Getty Images

Home prices went up in March. That was the news Tuesday from S&P/Case-Shiller; all indications are that April was an up month too, and that this summer's "selling season" will see continued price increases. Bit by bit, prices are regaining the ground lost during the long collapse from 2006 through early 2012.

In some ways this is great news. It means fewer underwater mortgages. It means better times for lenders, real estate agents and builders. It's a sign of broader economic health.

Still, if there's one thing we should have learned from the housing bust, it's that rising home prices aren't an unalloyed good. Rapid price increases in the early 2000s directly led to the subsequent crash. Sale prices lost all connection with both rents and incomes; after a certain point they were going up mainly just because they were going up, and buyers feared missing out. That couldn't go on forever.