Four times a year the Federal Reserve publishes a scorecard of sorts which tells us how we're doing in the money department. This time around you'll be happy to learn that you're now much richer.

According to the latest stats, households and non-profit organizations now have a net worth of $45.907 trillion. Why the government mixes households with charities, frat houses and historic societies -- among other non-profit groups -- is unclear, but these are the best numbers we have and they are going up.

In the second quarter we had an outstanding net worth of $45.270 trillion, an increase of $637 billion or 1.4 percent over the first three months of the year. Given that we have about 294.3 million people, we each became wealthier by $2,164 in the quarter. Going further, that's $8,656 in just three months for a household with four people.

Should we believe that a typical person gained almost $2,200 in new-found wealth in the second quarter of this year? Not hardly. Instead, take a look at where the money is.

The Fed figures show that in the second quarter home values reached $15.712 trillion -- that's an increase of $438 billion (2.63 percent) over the first quarter's $15.274 trillion. It's also more than two-thirds (68.76 percent) of all the new wealth created from April through June.

Seen another way, not everyone shared in the joy of more wealth. If you didn't own a home a huge percentage of the nation's new-found riches went to other folks.

In comparison, look what happened with stock: For the second quarter the value of corporate stock stood at $6.0655 trillion -- that's down from $6.0720 trillion in the first quarter. Mutual funds? Up from $3.3916 trillion in the first quarter to $3.4487 trillion in the second, a gain of $57.1 billion (.17 percent).

In effect, real estate outperformed Wall Street by a bunch.

Does this always happen? No. Must this happen in the future? No. Did real estate outperform Wall Street in the second quarter? Yes. Little wonder that the Christian Science Monitor ran a September 13th article entitled How much to put in stocks? Try zero.

What's interesting about these numbers is that they substantially undervalue real estate gains.

Think about how you buy real estate. You can pay cash but most of us don't. We borrow and we borrow a lot. A study by the National Association of Realtors says 93 percent of us finance. Among those who do borrow, first-time purchasers typically put down 6 percent of the purchase price while repeat buyers put down 23 percent.

No less important, today's value increases need to be compared with actual cash investments.

For instance, in 1999 NAR says the median sale price for an existing home was $133,300. At the end of June, the median average was $191,800.

Let's say someone bought in 1999 and between the down payment and closing had a cash expense equal to 10 percent down or $13,300. If prices at the end of June represented a three-month price increase of 2.63 percent, it means values rose by $4,915 in the quarter -- an amount equal to 36.95 percent of that 1999 cash investment.

Interestingly enough, NAR says that June prices were 9.6 percent higher than a year earlier.

But what about debt?

The Fed report shows that mortgage debt grew from $6.8736 trillion to $7.0783 trillion, an increase of $204.7 billion. In effect, equity growth out-paced debt growth by better than two to one.

Since you have to live somewhere what you pay in monthly housing costs is a form of "rent." What you pay to acquire the property, the cash money paid up front at closing and additional cash paid for capital improvements, represents an "investment" expense.

In effect, home values may have risen 2.63 percent in the second quarter -- but the percentage return on investment for real estate owners was vastly higher because few people paid cash for their property.

Will real estate prices continue to generally appreciate? No one knows. Aren't there forces that could push up interest rates and dampen home values? Absolutely -- look at the federal deficit and the long-term impact of our trade imbalance as two examples. Isn't there a downside to leverage? You bet. The same leverage which is so valuable when prices rise is equally powerful if prices fall.

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