Over the past year or so, you may have lost loads of money in the market. At this point, you may even be staring down the cheerless face of unemployment. But if you're a homeowner -- and two-thirds of U.S. families are -- consider some good news for a change. Odds are, you've benefited from the longest housing expansion in the last half-century, dating from 1992. And there's lots of evidence to suggest those gains will be sticking around.

Forget about all the hubbub surrounding the market for a minute and think about how much wealth has been created over the past few years in housing equity alone. According to mortgage finance agency

Freddie Mac

(FRE)

, home prices nationwide grew on an annualized basis at 5.7% a year over the past five years -- well above the annual gain in the consumer price index of about 2.5%. Housing prices typically outpace inflation by only one or two percentage points.

It Just Keeps Going and Going and...
The current housing expansion is the longest on record

Sources: Census Bureau, Series C-25 and Bureau of Economic Analysis, Survey of Current Business

A return of close to 6% may not sound that high. But consider that homes are pretty pricey assets: The national median price of an existing home in the first quarter was $139,700. At a rate of 5.7%, a homeowner could expect to see price appreciation of $7,963 in just one year. That's not even considering the effects of compounding.

Plus, the nationwide rate pales compared with gains in some urban markets. In San Jose, Calif., housing prices jumped 15% in the same five-year period; in San Francisco, 12%; in Boston nearly 10%; and in New York City, about 8%.

Those gains matter because homes make up a big chunk of the average family's wealth. Primary residences account for 21% of household net wealth, compared with 19% for stock investments (excluding retirement and pension accounts), according to the

Fed's 1998 Survey on Consumer Finances.

Home Equity Still Makes Up the Majority of Wealth for Most Homeowners
Share of homeowners with more equity in homes than stocks, 1998

Source: Joint Center tabulations of the 1998 Survey of Consumer Finance

Compared with stock ownership, housing ownership is more evenly spread among the population, so more people gain when house prices rise. "Lots of people own stocks, but the concentration

in ownership is overwhelmingly skewed" toward the wealthy, says Robert Van Order, chief economist for Freddie Mac. "Who really benefits is roughly the top 5% of the population or so, while the holdings of other people are relatively small."

In contrast, homeowners have "pretty much all gotten gains," Van Order says. "Almost every part of the country has had house price growth significantly above inflation for the last five years."

Even as the stock market has tanked, continued strong demand for housing has almost certainly helped sustain the level of consumer spending -- and by extension, the economy. According to Lawrence Yun, a senior economist at the

National Association of Realtors

, from peak to trough, the stock market lost $4 trillion in wealth from March 2000 to a year later. During the same period, the value of housing assets nationwide rose $700 billion.

Both the widespread nature of price gains and the popularity of refinancing, in a period of low mortgage rates, "have had a stabilizing effect on spending for a pretty wide part of the population," says Freddie Mac's Van Order.

"As an interest-rate sensitive sector, housing usually leads the economy into recession, or a softening," says Mark Duda, a research analyst at

Harvard University's Joint Center for Housing Studies

. "But with rates low, housing demand has remained high." In an unusual twist, this time it's strong housing demand that has helped prop up a weakening economy. More recently, demand has showed signs of softening somewhat; last week the government reported that sales fell 9.5% in April, the steepest drop since 1997.

Housing Gains vs. the Market: Smaller Returns, but a Lot Less Volatility

Of course, there's no question the stock market generated far more wealth than real estate in the late '90s. Compare the 5.72% annualized gain in housing prices over the past five years with the 15.8% annualized return for the

S&P 500.

But the silver lining for homeowners is that housing prices are less volatile than stock prices on the downside. Barring utter catastrophe, housing prices are certainly not going to drop 70% or 80% from their peaks, the way many stocks did. While prices are likely to drop in some overheated markets around the country, housing bubbles tend to burst a lot more slowly and mercifully than stock bubbles.

For example, as of April the median price of houses in Santa Clara County, Calif. -- the center of the Silicon Valley economy, which has been most affected by the dot-com downturn -- had fallen just 5.4% from a year ago. Of course, it often takes years for overheated markets to unwind, and it's too early to tell how much more prices could fall in places like Silicon Valley. But even in the markets that saw the craziest gains, nobody expects stock market-style retreats.

Why Housing Gains Should Hold Up

Despite a dip in consumer confidence and accelerating layoffs, housing sales are still holding up nationwide. The brisk pace of first-quarter housing sales prompted the NAR to forecast that 2001 will be the second-best year on record for sales.

In the short-term, housing sales owe their robust pace to the powerful influence of some of the lowest mortgage rates in three decades, with the average 30-year fixed-rate mortgage currently at 7.14%. The NAR estimates that for every 1% drop in mortgage rates, 3 million additional households qualify to buy houses according to their income. Of those 3 million, the NAR estimates that about 250,000 actually go out and buy homes.

But as mortgage rates edge up over time, other longer-term factors are expected to help sustain sales momentum down the road. According to the Harvard housing study, as the number of people aged 45 to 64 rises, demand will rise for second homes and primary homes with more amenities. Meanwhile, the children of the baby boomers, a demographically large group, will move into their home-buying years, pushing up demand as they replace the smaller generation above them. (Demand would probably be strongest initially in the relatively cheaper areas of manufactured housing, starter homes and rental apartments.)

Another factor fueling demand is continuing immigration. The Harvard study says people born outside the U.S. account for about a quarter of net new households over the past three years.

In the future, concerns about suburban sprawl and restrictions on building should also help prop up demand by curbing increases in the housing supply.

Price Appreciation Expected to Moderate

All of this isn't to say housing gains won't slow, particularly if mortgage rates continue to edge up and a slowing economy continues to undercut consumer confidence. Already demand shows signs of easing. Going forward, Freddie Mac economist Van Order suggests it makes sense to expect more modest gains in housing prices of about 2% above inflation. And in some metro markets, where housing bubbles could be overdue for deflation, prices may be poised to actually decline.

Still, if you're a homeowner, chances are you're sitting on a lot more housing wealth than you were just a few years ago. Given the uneasy prospects for the stock market and recent upticks in unemployment, at least that's something to feel good about.