The home-based "wealth effect" has earned millions of home owners thousands of dollars that are likely to see them well through the recession -- and perhaps ease the recessions' impact on the nation.

Washington, D.C.-based National Association of Realtors Home Wealth Effect Survey released during the association's recent convention in Chicago says the typical homeowner now has $50,000 in home equity -- $100,000 for households earning more than $75,000. Baby boomers, aged 50 or older, have still more money on the house -- $80,000. In some California and New England areas, home-earned equity is still more -- three, four times as much and higher.

While most home owners use that equity to move up to a larger home or buy a second home, according to NAR, others bank it, use it to invest and to pay off debts, but all of it amounts to kind of consumer spending that helps keep the economy churning.

As much as two thirds of the gross domestic product -- a measure of all the goods and services produced in the United States -- is due to consumer spending, according to the U.S. Department of Commerce.

NAR says the buildup of home equity provides Americans with a financial cushion they might not otherwise have to help brace them against economic downturn. Stock market investments have not fared nearly as well in since 2000.

"Homeowners use their home equity to get cash for emergencies as well as the purchase of big-ticket items," said NAR's chief economist Dr. David Lereah.

Also, during the last recession, home owners didn't have the added financial benefit of tax-free income of up to $500,000 on the sale of their home.

"The capital gains people realize from the sale of their home are a significant source of down payment funds for most repeat buyers, but they are used for other purposes as well," Lereah added.

Parsippany, NJ-based Coldwell Banker says even without those tax benefits, 30 years of economic history reveals home ownership is a good financial insulator against a cool economy.

The OPEC oil embargo in October 1973, high unemployment and inflation in the late 1970s, sustained recession in 1982 and 1983, and a widespread drop in stock market values in October of 1987 all illustrate how real estate weathers economic storms.

In November 1973, the Dow dropped approximately 14 percent from the previous month and did not regain the pre-crash level until January 1976, but new home sales nearly doubled from the seasonal lows of December 1973 (300,000 homes) to seasonal highs in May 1974 (580,000 homes).

The last sustained downturn (three consecutive years) in annual new home sales occurred from 1980 to 1982, during the highest rates of unemployment in recent history -- between September 1982 and June 1983 when unemployment hovered above 10 percent. The unemployment rate did not fall below 8 percent until February 1984.

Yet, during this sustained period of high unemployment, new home sales actually increased 51 percent year over year, from 412,000 new homes sold in 1982 to 623,000 in 1983, Coldwell reported.

"Residential real estate was bound to ease off the pace from earlier this year. As the equity markets stabilize and interest rates remain low, we don't expect a significant long term reduction in home sales," said Alex Perriello, Coldwell's president and CEO.

Housing likely will remain a stable investment and inject the economy with financial support also because of demand caused by the increased population -- 30 million in the last 10 years. The influx of immigrants, looking for first homes and the well-off baby-boom generation moving up and buying second homes continue to play a part, Coldwell says, and record low mortgage rates help support the demand.

Sept. 11's terrorist attacks on America could stem the tide of immigrants somewhat and consumer confidence has begun to take a toll, but the effect of housing on the economy should remain constant.

"There are contradictory influences and pressures on the real estate market, which make it difficult to speculate on short-term performance, but the underlying long-term value is still there," Perriello said.

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