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Thursday, Aug. 13, 1998
Rising home values are flipside of Asia crisis
Median home prices up 6% from last year as Dow regains ground lost in Tuesday selloff
By DAVE SKIDMORE
Associated PressWASHINGTON -- The value of Americans' homes is increasing considerably faster than inflation in most of the nation's metro areas, offering support for consumers' confidence that might have been threatened by the gyrating stock market.
Stocks posted sizable gains Wednesday, wiping out most of the remaining damage from Tuesday's sudden tailspin, as bargain hunters sifted through the wreckage of another selloff sparked by Asia's yearlong fiscal crisis. The Dow Jones industrial average rose 90.11 to 8,552.96 Wednesday, extending a late rally on Tuesday that shrank a 258-point deficit to a 112-point loss by the close.
Tuesday's slide, which came exactly a week after a 299-point plunge also triggered by Asia worries, briefly pushed the Dow to its lowest level since February and more than 1,000 points below the record of 9,337.97 set less than a month ago on July 17.
Nationally, the median home price -- meaning half sold for more and half for less -- increased to $131,100 during the April-June quarter, up 6 percent from a year earlier, the National Association of Realtors said Wednesday.
That compares with an inflation rate in consumer prices of just 1.7 percent over the same period.
The markets with the highest median prices in the nation were San Francisco, $329,400, followed by Honolulu, $305,000, and Orange County, Calif., $261,500.
The lowest prices were in Ocala, Fla., $69,100; Waterloo, Iowa, $71,500; and El Paso, $75,200.
According to economists, the healthy gains in home values could help offset the threat to consumer confidence from the stock market's Asia-inspired turmoil, though by itself home value appreciation wouldn't be enough to offset a true stock crash.
In a sense, the stock market's turmoil and the housing market's vigor have the same cause: Asia.
Stocks are rocky because traders fear loss of business with Asia will cut deeply into U.S. corporate profits. At the same time, Asia's problems have motivated international investors to pour their money into the U.S. bonds and that has lowered U.S. interest rates, including mortgage rates. Owning a home, in turn, has become more affordable.
``Appreciation in home prices . . . is the flip side of Asia,'' said economist Everett Ehrlich of ESC Co. in Washington. ``There's room for upper movement (in home prices) yet.''
In fact, despite the stock markets' strong gains in recent years and the proliferation of 401(k) and IRA accounts, Americans have almost as much of their wealth tied up in their homes as in stocks. In 1997, real estate represented about 27 percent and stocks, 28 percent, according to the Federal Reserve.
Economist Sung Won Sohn of Norwest Corp. in Minneapolis said a change in stock prices has a more direct impact on consumer spending than a change in home prices. Stocks can be more easily sold and converted to cash when prices rise. Conversely, a price drop can scare consumers into saving more and spending less.
But rising home equity influences consumers too, over time, by increasing their optimism and giving them added cash if they borrow through a home equity loan or refinance their mortgage and take money out.
Sohn said home prices gains recently have been extraordinary but he doubted price drops would become common, as they did after the real estate bust of the late 1980s.
``Home prices have gone up so rapidly that we are certainly nearing a plateau, but that doesn't mean we'll fall back -- unless we have a stock market crash and a recession,'' he said.
Of the 132 metro areas surveyed by the real estate group, only nine reported price declines. The worst came in Trenton, N.J., where the median dropped 5.4 percent to $135,400; Albany, N.Y., down 3.9 percent to $103,200; and Canton, Ohio, down 2.1 percent to $92,400.
However, 23 cities reported gains of 10 percent or better. They were led by Charleston, S.C., up 19.7 percent to $121,100; San Francisco, up 16.6 percent to $329,400; and Bradenton, Fla., also up 16.6 percent, to $104,900.
Other big advances came in Green Bay, Wis.; New Orleans; Mobile, Ala.; and San Diego.
By region, gains were strongest in the Midwest, up 7.9 percent to $114,000, followed by the West, up 7.5 percent to $172,900, and the South, up 7.1 percent to $115,900. The increase in the Northeast was 3.5 percent, to $151,100.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web