TO ALL Chicken Littles predicting a collapse in home values: Check out the national appreciation data released Wednesday and weep. The end of the country's unprecedented housing boom is nowhere in sight.
According to the latest quarterly resale value information compiled by Freddie Mac, the giant mortgage investor, the average American home rose in value by 7.6 percent from July of last year to July of this year.
True, that rate is off slightly from the 7.9 percent appreciation pace of the first quarter of this year. And true, it represents the fifth consecutive quarterly decline in the national appreciation rate.
But a 7.6 percent average gain is extraordinary in the face of an anemic stock market and a consumer price index that rose at an annual rate of just 2.1 percent during the same period covered by the new Freddie Mac data.
Embedded in the composite national rates are dozens of individual metropolitan housing market performances, some sharply lower, others sharply higher than 7.6 percent. For example, home values in Baltimore were up 9.1 percent at an annualized rate.
In the Washington metropolitan market, values jumped 11.2 percent during the year, and were up 3.5 percent during the second quarter, representing a 14 percent annualized rate of gain. Florida real estate also continued to be hot: Miami houses were up 12.5 percent, Sarasota up 11.4 percent and Orlando 8.4 percent.
Other big gainers: Nassau (Long Island), N.Y., up 13.2 percent, San Diego 11.5 percent, Boston and Los Angeles 10.4 percent, and Minneapolis-St. Paul 10.5 percent.
On the reverse end of the spectrum, San Jose houses lost 4.2 percent of their year-earlier resale values, and San Francisco homes lost about 0.6 percent, according to Freddie Mac.
What's happening here? Housing and mortgage economists agree that the handful of markets experiencing modest drops in values are undergoing corrections driven by declines in local employment and economic development. This is particularly the case for markets closely tied to high-tech, high-income employment centers.
Elsewhere, to varying degrees, the pattern is a gradual slowdown in the pace of housing price growth - but nothing dramatic, absent national or regional economic shocks. Freddie Mac chief economist Frank Nothaft says appreciation should average 6 percent to 6 1/2 percent nationwide for this year. That rate is sustainable, he believes, because of today's near-historic low mortgage rates hovering just above 6 percent for 30-year fixed-rate loans, and in the mid-5 percent range for 15-year money. Some adjustable-rate mortgages have been in the 4 percent range or below for weeks.
Lower rates tie in directly with higher home sale values. If you ask $300,000 for a house in a market where the top price never has been higher than $275,000, potential buyers might ignore you - or bargain you down - if mortgage rates are at 8 percent or 9 percent. But cut the price of money to 6 percent or below, and those same buyers may look at the monthly costs and say: OK, I can afford the mortgage. I'll meet your price.
Another phenomenon boosting housing values is the boomerang effect of a poorly performing stock market, and minimal interest returns from savings accounts. As houses continue to defy the Chicken Little doomsayers, consumers begin to conclude: Real estate is where the best returns are right now. Rates are low, values are jumping at 7.6 percent. I better invest in (a) a bigger house to reap bigger returns and greater luxury, or (b) buy a second home, a vacation property or some rental property.
Still another force at work, say economists, is the apparently irresistible lure of "monetizing" home equity - tax-free - through refinancing to help homeowners accomplish other financial goals. Freddie Mac's latest quarterly survey of refinancings nationwide reveals that 67 percent of all refis now result in loans that are 5 percent larger than the mortgage they are replacing. Simply put, two out of three refinancers are cashing out - monetizing - part of their equity capital and spending it. Nothaft estimates that during this year alone, American homeowners will take as much as $100 billion out of their properties tax-free and spend or invest it elsewhere in the economy.
More than 51 percent of the $1.9 trillion in new mortgages that lenders supply this year will go toward refinancing existing loans, according to Freddie Mac projections. By any computation, that adds up to billions of dollars worth of lower monthly payments on houses and critical support for continued growth in housing values.
Nothing is guaranteed, of course - as economists are the first to tell you. A war, a terrorist attack, a cutoff in the supply of oil could change these optimistic projections. But barring such catastrophes, housing looks like a solid, safe place to increase your money for the foreseeable future.
Kenneth R. Harney is a syndicated columnist. His e-mail address is kenharney@ aol.com. Send letters care of the Washington Post Writers Group, 1150 15th St. N.W., Washington, D.C. 20071.