America's House Party

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But there are troubling aspects to the real estate boom. At the stock market's peak, 1% of investors controlled about 33.5% of stock wealth; the top 1% of home-equity holders have only 13% of housing wealth. In other words, a broad drop in home values, should it happen, would affect a far larger cross section of Americans than did the NASDAQ bust.

Complicating that danger, home buyers have turned to some risky strategies to afford their purchases. Nothing-down, interest-only and "negative amortization" (in which you wind up paying so little each month that your loan amount grows larger, though hopefully your house's value rises faster) mortgages are on the rise. Such loans can pay off--if you sell within a few years at a profit. But if interest rates rise and home values stall or--gasp!fall, those borrowers may become overwhelmed by steadily rising payments. (Household monthly debt costs are already at an all-time high.) Even the bullish Lereah is concerned about the loose lending practices. Such trouble would have repercussions for the whole economy. If enough homeowners become swamped by their debts and have to sell, prices would drop, creating a reverse wealth effect and fueling a slowdown.

California's $186 billion state pension fund is worried enough to have begun unloading some of its real estate holdings. Phyllis Rockower, who started the Real Estate Investor's Club of Los Angeles in 1996, is worried too. Membership in her club has soared. "Most people who come to my meetings sold their high-tech stocks after 2000," she says. "We had to move to a bigger room. It's either a sign of the times or a market top." What's her bet? Rockower has six houses on the market--nearly every investment property she owns.

AFTER THE PARTY'S OVER

Whether the market rises, plummets or flattens, whether it happens over one year or five, it will not undo changes that the boom has wrought in the relationship between homeowner and home. The tech crash and the market slump didn't erase the culture of stocks. Even after day-trading mania disappeared, there remained a broad class of people buying stocks and mutual funds who were more knowledgeable than they used to be about the market and more closely attuned to business news.

Likewise, the deeper changes of the real estate boom are likely to stick, particularly the notion that the house is no longer just a home. By tapping their built-up home profits through refinancings and home-equity loans, owners have ensured that the home-as-piggy-bank will be with us for some time, and that may have wide implications for tomorrow's economy.

The American home now occupies a place somewhere between the humble family hearth of old and the cold numbers in our bank and broker statements. It is like a family gem, to be displayed, enjoyed for itself and continually polished and cared for--but one that you might just hock or sell off to pursue gaudier baubles. It is a statement of aesthetics and values and financial acumen. "It is a way to express your good taste," says Atlanta Realtor Heather Steiner, "and to show how much smarter you were than your peers."