In 1993, when Veronica Hulitt purchased a Los Angeles home for $140,000, she also began investing in mutual funds, heavily loaded with stocks.

Today, the senior analyst for Ralph's Grocery Co. is also a new mom, but she's seriously considering selling her home, renting and investing the difference in more stocks.

While her home has earned her only $10,000 in equity in seven years, her mutual funds have made her $20,000 richer.

"I'm very disillusioned. I purchased it thinking it was going to be a big tax break, but with every increase in salary I had to get more tax shelters. I thought by now I've have enough equity to consolidate some bills and I'd be home free," said Hulitt.

The American Dream is alive and well but, at the dawn of the new Millennium, more and more families are finding their dream on Wall Street not Main Street.

In recent years, the booming economy has swelled returns on financial investments at a pace that far exceeds home appreciation, according to the Federal Reserve Board's "Recent Changes in U.S. Family Finances: The 1998 Survey of Consumer Finances". The triennial study measures, among other consumer finances, financial wealth and nonfinancial wealth, including owner-occupied housing.

The Fed said the median value of a family's stock holdings alone rose 62.3 percent from $15,400 in 1995 to $25,000 in 1998, while the median value of homes rose only 4.6 percent during the same period. With such a gain, it's not surprising that financial assets comprise a greater share of a family's total wealth than they did a decade ago.

In 1989, financial assets comprised 30.4 percent of a family's holdings, compared to 69.6 percent for housing and all other non-financial assets. By 1998, the gap had narrowed -- financial assets swelled by 10.2 percent to 40.6 percent, while housing and other non-financial holdings dipped by a like amount to 47.1 percent.

The guilded castle

It's not as if home owners are selling off their shelter to finance day trading habits.

Quite the opposite.

The booming remodeling industry can credit the stock market for some of it's expansion, as wise homeowners trade in stocks to improve and shore up the equity in their home.

And in California's Silicon Valley, it's not uncommon for buyers to trade in stocks to finance 100 percent of a home purchase.

The region is a booming hotbed of home appreciation amounting to 50 percent or more since its market began to rebound almost a decade ago.

New numbers from the National Bureau of Economic Research reveal Americans now enjoy the longest economic expansion in the nation's history, largely due to the impact of technological advances emanating from Silicon Valley.

At the economy's ground zero, Darlene Dodds, a newspaper manager in San Jose, CA, purchased her home seven years ago for about $260,000. Today the 40-year old home is worth approximately a half million dollars and she's using $60,000 in equity to refinish her swimming pool, pay off bills and buy a new van for her five kids.

"It was a fixer-upper and I had to fix it up, but I've doubled my money," said Dodds who has scant stock market investments in a 401k account.

The expected return on a home's value -- even a return substantially less than Dodd's -- has contributed to the record of approximately 68 percent of Americans who own a home, which, despite the Fed's study, remains the family's single largest asset -- though not by much.

Nationwide, returns from stocks, bonds, mutual funds and retirement accounts have begun to tip the scales. Together, those financial investments comprise about 27.2 percent percent of a family's total wealth, both financial and nonfinancial. A home represents 27.9 percent of a family's total wealth, according to the Fed's study.

The Fed's study does not account for last year's bullish stock market, which could futher tip the scales in favor of financial investments.

"We knew it would overtake the housing market in 1999. I'd say (the stock portion increase) could be closer to 15 percent," said Steven L. Oliver, a financial consultant with Salomon Smith Barney in Bellvue, WA. The company offers mortgages backed by stocks and other investments.

"For the first time in history, the blue collar line worker at Boeing who has a $300,000 home, but has chucked money in a 401k for retirement, now has $400,000 in his 401k and his home is still worth $300,000," Oliver said.

The Fed identifies as nonfinancial assets the home, non residential real estate equity, business equity, vehicles, and artwork, jewelry, precious metals, antiques and other tangible goods. Financial assets include retirement accounts, stocks, bonds, mutual funds, transaction accounts (checking, savings and money market accounts), certificates of deposit, life insurance and other managed accounts (futures contracts, oil and gas leases, estate settlements, loans, etc.).

Its survey of 4,309 families the Fed identifies a "family" as a household with an economically dominant single person or couple, married or not, with or without others in the household financially dependent on the financially independent individual or couple.

The Fed study says, stocks, which comprised 15 percent of a family's financial holdings in 1989, now account for 22.7 percent. Mutual funds represented 5.3 percent of financial assets in 1989, but now account for 12. 5 percent of a family's financial wealth.

Retirement plans, more and more often 401k investments, represent families largest single financial asset, representing 27.5 percent of all financial investments, up from 21.5 percent a decade ago.

The jump in financial assets is largely due to a shift in employee compensation.

"More of a person's compensation is coming from stock options instead of bonuses and salary increases. Corporate America is doing away with pension plans and using 401k programs where individuals choose where to invest the money," said Eric Tyson, a financial counselor and author of IDG Books' "Personal Finance for Dummies" and "Investing for Dummies".

"The baby boomers are more aggressive in the investment market," said Tyson, also co-author of "Home Buying for Dummies" and "House Selling For Dummies."

Forrest Pafenberg, director of real estate finance research for the National Association of Realtors, concedes the dramatic asset shift represents greater access to investment vehicles, but not at the expense of housing. A home remains shelter both from the elements and less robust economies.

"Housing has performed well over 20 to 25 years, easily outpacing inflation. It would be stupid to take the value out of a home for day trading. Housing has always been known as an investment, just as any other asset in your portfolio," Pafenberg said.

Diversification is best

Perhaps, but market corrections in the housing market can be disastrous. Now booming, Silicon Valley recovered from a particularly nasty recession that cost some homeowners as much as 40 percent of the value of their home. Those home owners could have better weathered the storm with a cache of stock market investments to balance their portfolios.

"Ask anyone who bought in the peak of 1989 and had to sell in the early 1990s. Their losses were magnified by the fact that you had a leveraged investment. You lost not only your 20 percent down payment, but all the transaction costs to buy and to sell. That doesn't strike me as a safe investment," says Tyson.

Zelda Holcomb, a single mom and executive assistant at the University of Maryland-University College in Adelphi, MD had a similar, though less severe experience on the other coast.

She purchased her original home in Schenectady, NY for $48,000 and sold in three years later for $75,000, but two subsequent homes swallowed up most of the $27,000 gain.

She used the initial profit to buy a second home in Schenectady for $117,000 which she improved to the tune of $12,000. Holcomb unloaded it six years later for $113,000.

When Holcomb relocated to Columbia, MD in 1997, she moved into a $170,000 home. Since then it's been reassessed at $160,000.

She's recouped some of her financial losses thanks to two managed mutual funds each of which netted her a 10 percent return, just in the last two years.

"The thing about owning a home is that it's supposed to provide you with some security in its appreciation. It's been a big disappointment," Holcomb said.

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Published: February 3, 2000

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.