Some recent economic news shows that no matter where your customers are in the homeownership process, they can't lose. Homeowners have made more from their home investment than daring stock exchange traders, and the ones who have recently bought a new home are in luck, too. They can refinance, even if they haven't been in their homes for a year.

With the Nasdaq Composite Index checking out of 2000 with the worst performance in its history, and the Dow Jones industrial average showing its worst annual performance since 1981, investors believe that they have good reason to criticize the Fed for not cutting long-term interest rates in late December. Old reliables like bonds and real estate proved to be the safest places to put personal money, and the best returns by far were in real estate.

According to recent figures by Freddie Mac, home values rose by 7 percent across the U.S. last year, culminating in a 29 percent increase over the last five years.

While many financial analysts consider the home to be a home, not an investment, there is definitely some satisfaction to be derived from the fact that the average home investment beat the Standard & Poor's 500-stock index, ending in negative territory for the first time since 1990. While the National Association of Realtors estimates home values at a more modest 4.4 percent, the organization estimates the growth at a more modest 4.4 percent and says that most U.S. homes still beat some solid money market mutual funds, estimated to have earned about 5.5 percent.

While new economy stock icons such as Cisco, Sun and Oracle tumbled to fractions of their April 2000 prices, shares of Fannie Mae (FNM:NYSE), the largest GSE-backed (Government Sponsored Enterprise) insurer of home loans, recently traded at an all-time high share price of $89.375. According to a recent report, the GSE has benefited from the uptick in Treasury Bonds, a response to the Fed's continuing forecast of economic weakness and investor's interest in moving from speculative Nasdaq stocks to bonds. Freddie Mac's shares as well as the Federal Home Loan Bank system, a group of twelve regional FHLBanks privately owned by member-stockholders that include commercial banks, savings institutions, credit unions and insurance companies, are also trading at all-time highs.

David Lereah, chief economist for NAR, attributes high employment, modest mortgage rates, and a strong stock market as reasons for the high demand for housing, which resulted in the highest home ownership percentage in history. With a weak stock market, the demand for investment in housing and reinvestment could grow even stronger.

Already there is evidence that cash-out refi's are on the rise. Interest rates have dropped to lows not seen since May of 1999, allowing even recent home purchasers the opportunity to profit from a refinancing. Lower interest rates combined with the temptation of tapping into rising home equity to remodel or reduce credit card debt has borrowers lining up for loan approvals.

According to The Mortgage Bankers Association reports, refinancings accounted for 40 percent of all loan applications in the week before Christmas, about twice the refi rate of just three months earlier, causing the trade group to improve its forecast for total mortgage originations in 2001 by 22 percent to $1.2 trillion.

A perfect example is Helene Terry, a kitchen designer for Bentwood Kitchens in Dallas, and operator of a wall-bed and office systems company called Roommakers, occasionally buys properties, lives in them for a time, rehabs them, and then leases them. She recently purchased a fixer-upper with an 8 1/2 percent note. Since purchasing her property in the spring of 2000, Terry's new home has already appreciated approximately $10,000 according to local Realtors. Because of the fall in interest rates coupled with rising home prices, Terry finds that she can tap into her home's equity without raising her monthly payments.

But bankers and investors expect the flight from stock indices to bonds and real estate to be short-lived. The Fed is expected to lower short-term interest rates, which may cause investors to recover their confidence and return to the market. Mortgage interest rates will then rise enough to snuff out the refi boom.

So watch those interest rates!

Published: January 5, 2001

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.