NAR:
The Family Home Is a Major Source of Wealth
Americans may have lost a fortune in the stock market during the past
year and a half, but at least one other major source of wealth remains:
the family home.
According to a survey released by the National Association of Realtors
at its annual conference, strong home-price appreciation continues to
generate wealth for homeowners. The NAR said the typical American homeowner
has about $50,000 in "unrealized gains" in the value of a home,
which some are tapping through a home-equity loan or other similar financial
instrument. Meanwhile, Americans who sell their houses are collecting
on average $20,000 in capital gains, which they can put into savings or
use to buy another home.
The survey also found that wealth from housing is greater than wealth
from stocks for three out of four homeowners.
The report provided a glimpse at how some people are using their equity.
About 76% of homeowners who collected capital gains from the sale of a
house used all the proceeds for the down payment on their current home,
while others used the money to invest in stocks or other investments,
buy goods, or add to savings. NAR said for every $1 of "realized"
gain from home sales, up to 24 cents was spent on goods and services or
put into savings.
In addition, many people said they had tapped at least some of their
"unrealized" gain through a home-equity or similar loan, or
through a "cash-out refinance," in which borrowers refinance
their mortgage and extract cash at the same time.
The NAR said it conducted the survey in part to satisfy the curiosity
of the Federal Reserve, which has been especially interested in knowing
what consumers are doing with the equity in their homes.
But the survey, which began in August (2001), was cut short by the Sept.
11 terrorist attacks and contains results from just 500 households. The
NAR says it plans to conduct a more exhaustive survey in the future.
Despite its shortcomings, the report was consistent with earlier research
indicating that wealth from homeownership runs deeper than wealth from
stock holdings.
The survey was released in an environment of unusual anxiety at this
year's real-estate conference, as many real estate agents -- known for
their sunny outlooks -- wondered aloud about the effect of recent terrorist
events on the housing market. "If there's no job market, people aren't
going to buy homes," said Maddy Tousignant, owner of Stephens &
Associates Inc. GMAC Real Estate of Iron Mountain, Mich. Housing could
fade as a creator of wealth if home prices stop growing, as many fear
will happen.
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