If you've thought there's been no better business than real estate during the past year, you now have the numbers to support such thinking.

Existing home transactions reached a record high in 2003 with 6.1 million sales, up 9.6 percent from the year before, according to the National Association of Realtors.

At the same time, says the National Association of Home Builders, "total new single-family home sales for 2003 reached 1.085 million, up 11.5 percent from the previous annual record of 973,000 in 2002."

These are amazing numbers for those in the real estate industry because unit sales mean lots of business opportunities for brokers, lenders, insurers, lawyers and builders. But more important to consumers is another number, the one that talks about appreciation. NAR says that the national median existing-home price was $173,200 in December 2003, up 6.7 percent from December 2002 when the median price was $162,400.

If you want to know how America is going to pay off it's credit card debt and college tuition bills, look no further than the joy of real estate appreciation.

The numbers above translate into big dollars. According to the Census Bureau, we have a total of 121 million housing units. Of these, 72.2 million are owner-occupied. So, if a typical home had a typical value increase, it means each owner would have additional equity worth $10,800. Nationwide, that comes out to $779.8 billion.

That $10,800 is a very special number. It was earned without a day at the office or an hour on the factory floor. It is a sum which will not be reduced by Social Security taxes, Medicare or state withholding. And at some point in the future, when the home is sold the odds are overwhelming that no capital gains tax will be paid.

In the real world, of course, things are not always typical or average. Some properties saw more appreciation than the national average in terms of percentages -- and some saw less. As well, price increases were not evenly distributed -- some communities saw huge value increases while there are no doubt other places where property values remained stagnant and perhaps even dropped.

A twelfth of 2004 is now past and interest rates remain below 6 percent for fixed-rate, 30-year financing. The economy -- in many respects -- seems to be recovering from the dour times of the past three years.

But it's equally true that unemployment remains a significant problem, one that no amount of political damage control can hide or deny. The value of the U.S. dollar when compared with the Euro has been stressed for months. Government budgets at the state and federal levels are awash in red ink. It doesn't help that Medicare reform legislation, passed two months ago, has seen cost estimates rise from $400 billion to $534 billion. And impressive increases in the gross national product haven't done much for a lot of our neighbors -- personal bankruptcies are at record levels.

Non-real estate factors always play a big role in determining home values and sale volume. You need jobs, increasing local populations and good times to power real estate sales and appreciation. At this moment, it's not believable that unit sales can rise eternally. As to prices, the real test is not how much they've increased on a cash basis, but how much they've gone up after inflation.

So here's what I see for 2004. Good real estate sales by unit volume? Yes. Record sale levels? No. Price appreciation above the rate of inflation? Yes. As much percentage appreciation as we saw in 2003? No.

Keep in mind that real estate is a long-term investment. While year-to-year numbers are interesting benchmarks, such national calculations are far less important than the ultimate number, the one that counts: The net result when you sell.

For more articles by Peter G. Miller, please press here.

Published: February 3, 2004

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .