By Boyce Thompson. My wife and I can't believe what the house down the street just went for. Granted, it's in a great location, close to the city, and within a fine school district. But, boy, did they pay a lot of money. And to think that our house is worth nearly just as much!

I'm sure a lot of you have had the same experience lately. Word travels quickly through the neighborhood when everyone's biggest asset takes a quantum leap in appreciation. The government reports that through March, year over year, the value of new and existing homes is up about 6.5 percent. In many places, the numbers are even higher.

Six and a half percent is a lot better than my 401(k) plan did during that period--a lot better. And it's better than my mutual fund did. It's too bad I didn't take some of that money out a couple years ago to buy an investment property. I probably could have paid for a couple years of college tuition for my kids with the proceeds.

When opportunity knocks

The more financially nimble of us have no doubt taken advantage of opportunities like that. You see the signs occasionally--customers paying all cash or taking an early position on a home in a new master plan, renting it for two years, then selling the home after its value has gone up $30,000. Speculation is back in the market, though it's by no means rampant. If it were, the Fed probably wouldn't have decided to leave interest rates untouched last month.

Make no mistake--housing is a great investment. Frank Raines, the chairman and CEO of Fannie Mae, presented numerical testimony to that fact in a recent speech at the National Press Club. He asked everyone to look back to 1990 and imagine that they had just received a $10,000 year-end bonus. Where should they put it?

Photo: Jo Lance

The conservative choice would be an index of SP 500 stocks. A more aggressive choice would be to invest in high-technology stocks through a NASDAQ index fund. The final choice he presented was making a down payment on an $80,000 bungalow. The results

Now it's 12 years later. Which investment did better, assuming in each case you still had to pay for shelter? The value of the SP 500 more than tripled, so from this initial investment you could have made $22,000, pre-tax. The value of the NASDAQ quadrupled during this period, producing a $30,000 pre-tax gain.

Appreciation in home values may not have made the headlines that the stock market did during the last 12 years but it provided some nice returns--4 percent per year nationally. Which means that $80,000 home would be worth about $126,000 now. And if you sold it, the $46,000 gain would be free of capital gains taxes. Housing, of all things, produced the best return.

As builders, you shouldn't lose sight of the fact that you build wealth for Americans. Chances are that your buyers during the last 12 years made more money on that investment than they did on the stock market. And think of all the tax revenue they generated for the government. Mention that next time you are asked to defend your plans for a new community at a county board meeting.