America's Roaring Housing Market
America's Roaring Housing Market has left millions of Americans richer, fueling the consumer spending that's buoying our economy.
Home Sweet Home
Check your water cooler or dinner party conversations. These days, everyone's talking about the soaring prices of residential property. The market is on steroids. Prices have been rising at the fastest rate in five decades, double digits in most markets: up by 27 percent last year in California, over 20 percent in Florida, 15 percent in New York, 35 percent in Nevada. Compare all this with the three-year average annual return in a typical diversified stock fund, which has been about 5 percent or so, and you know why people are all stoked about the home real-estate market.
It is all very reminiscent of the fever of the "new economy" stock market in the late 1990s. Today, housing has replaced tech stocks as the hot way to accumulate wealth for the some 70 percent of American families who own homes, the result of an 11 million increase in households that own their own homes since 1993. Given our low interest rates and the jump of about 50 percent in all home prices over the past five years, it has been possible for many Americans to turn their home ownership into cash machines, through equity loans or mortgage refinancing, at a time when the stock market has been languishing. Last year, Americans took out about $225 billion of their home equity, and even more in 2002 and 2003. Half of that was saved, and half was spent.
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