HOW IMPORTANT is your home equity to your family's net financial wealth? If you're like the majority of Americans, it's absolutely crucial - far more so than your growing portfolio of stocks.
A new research report from Harvard University's Joint Center for Housing Studies reveals that despite the booming bull market in stock prices during the 1990s, 59 percent of all American homeowners who own stocks derive more of their net wealth from their homes.
How much you count on home equity vs. stock holdings for your net wealth depends significantly on how much you earn.
Among owners with incomes between $20,000 and $49,000 a year, more than 70 percent of them have more equity in their homes than they have in stocks.
Among owners with incomes of between $60,000 and $99,000 a year, well more than half of them have more real estate equity than stock.
But once your income exceeds $100,000, you're more likely to have more tied up in the stock market at the moment than in your house:
Only 40 percent of all homeowners in the $100,000 and up category have bigger home real estate equities than stock portfolios.
The new housing wealth data are contained in the Harvard Joint Center's "State of the Nation's Housing 2000" study released last week.
Using computer analyses of Federal Reserve Board data, researchers documented the unprecedented increases under way in homeowners' wealth, from their rapidly escalating real estate values to their stocks.
Consider this: Between 1995 and 1998, American homeowners saw their home values jump by 20 percent to a record $9.4 trillion.
From 1995 to 1999, homeowners took more than $560 billion of capital gains from home sales, primarily tax-free.
Though a significant part of that presumably was reinvested to buy replacement homes, big chunks of that cash went directly into the high-flying consumer goods sector of the economy, as well as into stocks.
Do homeowner gains from the roaring '90s set them apart from non-homeowners? Dramatically so.
Two unequal Americas
In terms of household wealth at the end of the decade, Americans are divided into two separate, and very unequal, economic societies - those who own homes and those who rent.
For homeowners 55 years of age and older, the contrasts are especially sharp. Home-owning households in the United States have a median net wealth of $177,400 and home equity of $80,000. Renters in the same age bracket have a median net wealth of just $5,500 with zero equity.
As Harvard Joint Center Executive Director Eric Belsky put it in an interview, "If you're a renter in this country and you don't get on that ladder of homeownership at some point, you stand a good chance of never being well-off."
Though the net wealth disparities between homeowners and non-owners are in part a function of household income, they are also attributable to the sheer growth of equity values experienced over time by owners, but never enjoyed by renters.
For instance, among households of any age with incomes of more than $50,000, the median income among renters is $63,000 a year vs. $74,999 for owners.
But the median wealth of homeowners in this income bracket is more than four times greater - $238,500, compared with $51,300 for renters.
Race and ethnicity have strong correlations with homeownership - and net household wealth.
80% of whites own homes
The Harvard study found that among whites between the ages of 45 and 54, 80.9 percent were homeowners in 1999.
Among African-Americans in the same age group, 58.6 percent were homeowners. Among Hispanics in the 45-to-54 age bracket, the homeownership rate was 57.6 percent. And among Asians, Native Americans and others the rate of homeownership was 68.3 percent.
Those rates are inevitably reflected in the net household wealth of these same groups: White homeowners had a median net wealth of $148,920 in 1998, including $60,000 of home equity.
By contrast, white renters had a median net wealth of $5,800. African-American homeowners had a median net worth of $67,280, including $29,000 in equity. African-American renters had a median net wealth of $1,661.
Hispanic homeowners had $70,000 in net household wealth, with $43,000 in median home equity. Hispanic renters had $2,000 in median net wealth and no equity.
Asian and other homeowners had $163,800 in net household wealth and $70,000 in equity vs. $7,760 in net wealth for Asian and other renters.
The bottom line here: Whether you like it philosophically or not, homeownership is a key to wealth in the American economy.
Home equity grows for many homeowners like the grass in the lawn - round the clock - as long as the local and national economies are sunny. Non-owners, whether they own stocks or not, enjoy no such built-in bounty.
Kenneth R. Harney is a syndicated columnist. Send letters care of the Washington Post Writers Group, 1150 15th St. N.W., Washington D.C. 20071.