It's starting to look like a bubble to me, or at least a bubble-in-waiting. I'm talking about real-estate prices. Buyers are willing to pay almost anything just to own their first home or a bigger home than they have now.

Not only did median home prices soar this spring, they rose at a faster rate than they had before. Signs abound that investors nervous about stocks are socking their money into real estate instead.

In this year's first quarter, the median price of existing homes rose by 4.6 percent compared with the same period last year, according to the National Association of Realtors.

In the second quarter, buyers got even more excited pushing price gains to 6.4 percent. In June alone, they spurted by 8.8 percent. Demand is strong and there's not a huge inventory of homes for sale, said NAR Chief Economist David Lereah.

In 35 metro areas, prices have risen at double-digit rates led by Sacramento (up 23.9 percent). Those are huge returns on the small down payments that buyers generally make.

Banks are fueling the fire by giving outsize loans. Many will lend most or all of the value of the house. Sellers know from the get-go that buyers will be able to raise the money they need.

You can often borrow even more on a home-equity line of credit. Among large banks, one in five will lend 20 percent more than the house is worth, according to the Consumer Bankers Association in Washington.

Gambling on appreciation

When buyers take outsize loans, they wind up with little or no equity in their homes. The same is true for many people who refinance.

They don't care because they think prices will rise. They'll gain future profits by magic, just as they expected to gain them in stocks.

How smart is it to takes loans against most of the value of your home?

So far, consumers have largely escaped the substantial business-sector recession that's currently going on. Real incomes aren't rising very fast. But thanks to lower interest rates, homes have remained affordable for the average buyer.

As long as prices keep rising, people will feel reasonably wealthy despite the drop in stocks.

But ask yourself how good would you feel if you borrowed to the hilt and house prices didn't rise? With little or no home equity, you couldn't afford to sell and pay off your loan.

That last happened a decade ago, in the 1990-91 recession. High-flying real-estate markets plunged.

Whether the current slowdown technically registers as a recession remains to be seen. But businesses are going to keep cutting workers loose. Unemployment, currently at 4.5 percent, is likely to top 5 percent before the slowdown ends. Fewer jobs mean fewer homebuyers. In many hot markets, sales have already slowed.

And what if you're one of the job losers? People aren't finding work as quickly as they did last year. This is no time to be adding to debt.

Best advice for homeowners today:

Hold your borrowing on homes to the traditional 80 percent of value or less.

Borrowing wisely

Feel very secure about your job before stretching to buy a vacation home.

If you refinance, think about shortening the term of your mortgage to 15 years, rather than lengthening it to 30 years.

Don't borrow against your home to pay off your credit cards. Once your credit cards are clean, you'll probably start spending on them all over again. No one ever got out of debt by borrowing more.

If you borrow to remodel your home, don't take an excessive line of credit. Most likely, the expansion or modernization will cost more than the value it adds to your house.

Don't refinance with a larger mortgage to get extra money for consumer goods. This is an era to add to savings, not to the stuff you own.

These thoughts may be early. Price bubbles usually last longer than anyone expected. But we're talking about your bedrock asset. You don't want to carry it over the edge.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.

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