The rate of home price appreciation varies substantially among cities. New England continues to reveal some of the nation's greatest strength in home price appreciation as three cities and five states are among those ranked tops in appreciation growth. The previously booming West revealed spotty home price appreciation strength with some regions at the top of the heap and others at the bottom. Through the middle of 2000, real home prices were rising in all but a handful of major metropolitan areas in the United States. In such a climate, the benefits of homeownership seem obvious. 

Owners whose property appreciates accumulate wealth, and most are protected from rising out-of-pocket housing costs by fixed or slowly adjusting mortgage rates. Clearly, home price appreciation is only part of the return to investing in a home. The bulk of the return to owning accrues to the owner household in the form of valuable housing services. As housing markets typically perform well in periods of economic growth, the current market characteristics do not suggest comparable declines to those we observed in previous downturns. On the other hand, housing prices cannot appreciate at rates substantially greater than those of general inflation indefinitely.

During the first seven years of the cycle, top and bottom quintiles experienced similar booms; during the bust, the low-end fell the least; over the last five years of the observation
period, the high-end did somewhat better than the low end. To summarize, while substantial differences in the pattern of home price appreciation and depreciation can be observed across time and across the three metropolitan areas, by and large, lower-income neighborhoods have done reasonably well in comparison with higher-income areas of the same cities. Home price appreciation is but one component of the overall return to an investment in housing. But appreciation is an important component, and the results presented here are at least somewhat encouraging.