Personal finanace
Investors enjoy soaring home values
USA Today
A five-year bull market in housing is making economic history both for the record 30 million homes sold and for a tremendous surge in home values.
Home values increased 34.8 percent on average nationwide over the five years ended June 30, vs. inflation of 13.6 percent, the government says.
Homes appreciated faster in the late '70s, but inflation severely eroded gains. Price gains in this housing market are unprecedented in times of low inflation, economists say.
Also unique is the geographical breadth of the latest rally. Only Hawai'i, with growth in home values of just 1 percent, failed to keep pace with inflation.
Robert Van Order, chief economist at mortgage investor Freddie Mac, says, "In the past, there was always a Texas or a California or a New England that was doing poorly" while prices rose in other regions.
The remarkable run-up has permitted homeowners to fatten net worth even as stock portfolios have faltered.
But rising unemployment and the sluggish economy have already started to take the edge off many markets. And the high-end housing market has cooled nearly everywhere.
Nationally, the volume of home resales was down in July, and prices are increasing at a slower rate.
Gail Goodman bought her White Plains, N.Y., home five years ago for $205,000. She estimates the run-up in value at a dizzying 68 percent.
And it is all the sweeter for Goodman because she had waited three years starting in 1989 for a previous home to sell in a dead New York market.
Goodman, who is self-employed, tapped equity last spring to pay off higher-interest loans. She has no other plans to exploit the rising value anytime soon.
"I bought the house just because I wanted to live in it," Goodman says. "The fact that this house is a great investment is just a stroke of luck."
Frank Funis has seen similar growth in his middle-class neighborhood near downtown Seattle.
He estimates the value of his home, purchased for $160,000, has nearly doubled in the 12 years he's owned it.
Despite the national economic downturn, Funis says he expects appreciation to remain strong.
Price growth is on pace to hit 6.9 percent in 2001, down from 9.5 percent in 2000, according to the government's recently released house price index.
The government makes its calculation by tracking repeat sales of 14 million single-family houses in which a federally chartered mortgage investor — Freddie Mac or Fannie Mae — was involved.
Condominiums and co-ops aren't included.
A USA Today analysis of the house price index data shows these trends:
• Massachusetts, with values up 59.3 percent on average, has led the nation for the strongest price appreciation over five years.
• California, New Hampshire and Colorado saw 50 percent-plus growth in average home price.
• Just 10 states and the District of Columbia recorded five-year price growth greater than the national average.
