EVA ROSENBERG IS A CPA AND tax educator known in the Internet world as Taxmama. To her, the housing boom and the low interest rates are a “brief blink in history” that have created a tremendous opportunity.

“I have clients who have refinanced their mortgages every year for the past three years,” she says. “I only refinanced twice in the last three years. I'm down to 4.3 percent-fixed—for 10 years. The trade-off is I'm in California. My assistant can't afford to buy a house.”

It is the essence of the current housing boom. The same factors that have produced winning strategies for some groups have crippled others. Baby boomers have taken advantage of their equity to fuel dramatic increases in the second-home market. But young families, traditionally the target buyer for entry-level product, found themselves quickly priced out of the market for any kind of housing, much less a new house.

Others who did qualify for a mortgage traded high-priced, but convenient urban apartments for long commutes and the extra responsibilities of homeownership and were quickly overwhelmed by the costs. Retirees on fixed incomes saw their incomes shrink in the face of rising property taxes with the increased values of their homes.

Here are examples of economic sectors that have benefited from the housing boom and others still waiting for the benefits to come to them.

Cashing In: The Winners Builders

As most builders know, new-home construction is on record pace in 2004. Fischer Homes and Maple Street Homes (one company targeting different market segments) of Crestview Hills, Ky., have seen a steady 15 percent to 20 percent growth for the past three years. The companies closed just over 1,000 homes in 2003 and expect to do about 1,200 units this year, president Bob Hawksley says. Building at price points from $80,000 to $500,000, they are seeing strong results in all their target markets. “The resale market is very strong, as well, helping people get into other homes.”

Fieldstone Communities, based in Newport Beach, Calif., is benefiting from the increase in land prices, says Kenneth Artz, executive vice president and CFO. To have more control over its prices and volume, Fieldstone purchased enough lots to increase closings from its current 600 units per year in California to an anticipated 1,000 closings by 2006. Its Utah division should double its 2003 closings to about 500 units by 2006, as well.

Looking to the future, Artz says the rapid increases in housing prices in Southern California aren't sustainable, but that's not a signal that the housing market won't continue to grow at a robust rate.

“Every builder is looking for some sort of a warning sign,” he says. “Bankers are looking for them, too. I don't see anything we can grab on to. If interest rates were to go up a little, the demand would go down and balance out the market. I don't know that I see anything at the moment that says the sky is going to fall.”

Baby Boomers They've owned their homes for years. If the house isn't already paid off, they're pretty close. Plus, thanks to the housing boom, the value of their property has appreciated dramatically. At the same time, baby boomers are finishing out their careers during a generation of robust salary increases, and they are the beneficiaries of a massive transfer of wealth. In simple terms, many of them have inherited a boatload of money from their parents.

Al Caicedo, a financial planner, works with boomers and retirees to preserve their assets. He encourages them to look at their homes as a financial resource to enhance their portfolio. Skittish of the stock market, many of them are turning to the investment that's done so well for them already—housing—by buying another house. Typically, it's an older home that they can fix up themselves.

“A lot of people in that category love to find a diamond in the rough and make it a gem,” Caicedo says. “That's their project. They spend the summer working on it. It's more than just money. It's togetherness. It's a growing boom. They're doing it for financial and mental health.”

Naturalized Citizens Several studies have reported that immigrants who have been in the United States more than a decade, and especially those with permanent resident status, tend to mirror the native-born population's home buying activity. In fact, the U.S. Census Bureau reports that once immigrants become U.S. citizens, they are more likely to own homes than their U.S.–born counterparts.

Seventy percent of naturalized Asians and Pacific Islanders are homeowners, compared to 57 percent of Asians and Pacific Islanders born in the United States. Similarly, 63 percent of Hispanic naturalized citizens own a house; the rate for U.S.–born Hispanics is 54 percent.

“Surveys show they place a very high value on becoming homeowners,” says NAHB economist Michael Carliner. “The reasons Hispanics don't become homeowners as fast is they tend to be younger and tend to move into areas where it's hard to get a house, like Los Angeles.”

Building Materials Manufacturers By all accounts, the housing boom has been phenomenal for building materials manufacturers. In February, stock market analyst Keith Hughes of Atlanta-based SunTrust Robinson Humphrey Capital Markets, told The Wall Street Transcript that “the new-home construction products have been fabulous for the last 12 months. They probably couldn't be any better.”

As is so often the case in a market economy, higher demand has resulted in higher pricing. While reports surfaced in the summer of 2003 that orders for the military in Iraq had pushed up lumber prices, the forestry products industry publication Random Lengths reports that record levels of housing starts are behind the stratospheric increases.

The increases aren't limited to wood products, either. Builders are reporting higher prices for steel, copper, roofing materials, and even galvanized nails.

Second-Home Builders Some boomers may want to spend their time renovating a fixer-upper, but there is another whole category that wants a brand-new place. Far from building compact cottages and cabins, second-home builders are cashing in on the boomers' accumulation of wealth. These buyers have purchased several homes during their lifetimes, so they know what they want—and they're willing to pay for it. They view their second homes as places to gather their families together—and as an asset they can pass on to the next generation—so they want more space.

“People want their second home to be where everyone goes on vacation,” says Richard Gollis, principal of The Concord Group in Newport, Calif., a real estate advisory board working with the building and development industry. “We see them buying fairly large houses. They want the kids and grandkids to gather there to create family experiences. It's really about sleeping capacity.”

That's good news—and no surprise—to active-adult and second-home builders such as WCI Communities, Pulte/Del Webb, and Arvida, developer of the St. Joe land holdings in northwest Florida. Their homes in the new Watercolor development adjacent to Seaside are selling from $650,000 to more than $2 million, says Dave Thomas, director of construction for Watercolor. All of the units are vacation homes—and they're all cash deals.

Sub-Prime Lenders Bad credit might not seem like a winning strategy, but for sub-prime lenders—or non-prime, as they're called in the industry—it's a profit itching to be earned. The wretched excess of the 1990s, along with the tech bust, the stock market drop, and the rise in unemployment, created a massive market of consumers who don't qualify for prime lending. Combine that with the housing boom and refinancing frenzy and you've got the makings of a very lucrative industry.

“We're keeping very busy,” says Ray McKewon, executive vice president and co-founder of Accredited Home Lenders, a San Diego–based non-prime lender. “Our business is growing in 2004 over 2003, and 2003 was a great year.”

McKewon is quick to point out that many of his customers have great credit. They just don't have much money for a down payment, especially in markets where housing prices show no signs of slowing down.

“As breathtaking as housing is [in San Diego] in terms of price, demand is far in excess of supply. Even my high school economics tell me that prices will go up and stay up.”

Left Behind: The Losers Low- To Moderate-Income Home Buyers

Across the country, the gap between the increase in wages and increasing housing costs continues to widen, leading the U.S. Conference of Mayors to proclaim an affordable housing crisis. According to the National Low Income Housing Coalition's “Out of Reach 2003” report, American workers need to earn at least $15.21 an hour to be able to afford the fair-market rent on a two-bedroom house or apartment and keep the price to the 30 percent of income that's considered acceptable for housing costs. In the least affordable market, San Jose, Calif., that figure skyrockets to $35.02. (HUD defines fair-market rent as “the dollar amount below which 40 percent of the standard quality rental housing units rent.”)

A new study, “Expanding Affordable Homeownership with Private Capital: A Study of the Nehemiah Down Payment Assistance Program,” from the Milken Institute, a nonprofit economic think tank based in Santa Monica, Calif., looked at six housing markets—Atlanta, Baltimore, Columbus, Ohio, Philadelphia, Sacramento, Calif., and St. Louis. On average, housing prices appreciated 68 percent over the last 10 years. Wages, however, went up an average of 38 percent, leaving a 30 percent affordability gap for low- to moderate-income families.

“In urban areas, to a large extent, unless we're able to increase penetration of low-to moderate-income families, there's a risk of having a disassociated class, or a class that feels it doesn't have a stake in the American dream,” says Ross DeVol, regional director of economics for the Milken Institute. “It makes it more difficult to have connectedness to neighborhoods to assist urban development. ... If people haven't been able to get into the housing market over the last five years, it will be increasingly difficult because they've missed out on the run-up on appreciation. As interest rates creep up, they might be priced out of the market.”

Bankruptcies And Foreclosures According to the Mortgage Bankers Association, housing delinquencies fell in the last quarter of 2003, but foreclosures edged up. More than 11 percent of loans to both sub-prime and FHA buyers—the riskiest borrowing group—were in delinquency at the end of 2003. Nearly 3 percent of FHA loans and more than 5.6 percent of sub-prime loans were in foreclosure.

In Phoenix, the second-largest housing market in the country, the foreclosure rate shot up by 50 percent in two years, The Arizona Republic reported. In 2003, the rate of foreclosures actually outpaced increases in home sales and prices, the newspaper said.

Diane Giarratano, director of education for Novadebt, a nonprofit credit counseling agency in Freehold, N.J., sees the human side of the numbers every day. With the increase in housing prices and the ease of financing, she's seen a rise in the number of people whose loans are in default.

“With the lower interest rates and so many different programs, pretty much anyone can get a mortgage,” Giarratano says. “There are jumbo loans and the 125 loans. People are taking those, leaving them with zero or negative equity. From the beginning, they should have bought a house they could afford.”

Recent Immigrants Recent immigrants to the United States, primarily from Mexico, Central and South America, Asia, and Africa, have several common characteristics that create barriers for them to achieve homeownership.

In general, they are poorer, less educated, and less fluent in English than many of the immigrants who came before them, says Audrey Singer. Singer is the author of a newly released study, “The Rise of New Immigrant Gateways,” on immigrant settlement patterns for the nonpartisan public policy think tank the Brookings Institution, based in Washington. That combination of attributes means their access to any kind of employment generally is limited to the lowest-paying jobs.

Owners Of Rental Housing When interest rates drop and housing takes off, rental property takes a big hit. According to the U.S. Census, rental vacancies at the end of 2003 were at their highest rate since the agency began tracking the numbers in 1960. Plus, it's tougher to find good tenants because the people who would have paid their rent on time had good enough credit to qualify for a mortgage. At the same time, the soft job market has resulted in young people—the primary rental market—either moving in together or moving back home with their parents.

But that's predominantly in the higher-end rental market. The National Low Income Housing Coalition notes that the fair-market rent for “modest, safe, and healthy housing” decreased in only nine counties in the country—three in California and six in Oklahoma.

“Rental properties have taken a hit and the age 21 to 35 cohort is predicted to shrink,” says Gollis, of The Concord Group. “Developers and operators are having to shift their focus to go after older renters and renters-by-choice.”

Economists say the news invokes the possibility of a housing bubble on its heels. For-sale housing prices and rental rates generally track each other. At the moment, they're diverging, but at some point, they should line up again.

Elderly Homeowners Their mortgage payments may be stable—or non-existent—but their Social Security benefits don't go as far as they used to, their retirement funds may have been decimated in the stock market, and their property taxes are soaring. Nothing could have prepared elderly homeowners in markets such as Baltimore, where housing prices increased 91 percent between 1992 and 2003, according to the Milken Institute study.

Some have tapped their considerable equity to meet the rising costs, leaving them at risk of losing their homes if they can't meet the payments. Selling often is not an option because of a lack of available housing.

“Some do have a huge amount of equity in the house; they're protected while they're in the home,” Giarratano says. “For people who have already used up the equity, that's where they're looking at foreclosure. If they've used the equity, they won't have money for a down payment, and it will be extremely difficult to find something else they can afford.”

Manufactured Housing Manufactured housing has struggled as an industry in the past several years, mired by a bad reputation and high delinquency rates. A 2003 market study, “Freedonia Focus on Prefabricated Housing,” by the Freedonia Group, a Cleveland-based market research firm for Fortune 500 companies, also noted that the extremely low mortgage rates of the past several years made it easier to buy a site-built home.

That may be changing, however. With the rising cost of traditional construction, the cost savings associated with these homes are attracting attention. Plus, in February 2004, Fannie Mae announced it would resume purchasing 30-year loans on manufactured homes with as little as 5 percent down payments.

Learn more about markets featured in this article: Los Angeles, CA.