SEND YOUR MONEY HOME

By Daniel Kadlec

Your home has always been your castle, and it used to double as a piggy bank, until a classic late-'80s bust crushed the notion of housing as an investment. But the market is finally springing to life again, and fast. Remember those heady housing markets of the 1970s and mid-'80s? Forget 'em. Not returning anytime soon. But for the first time in a decade, home prices in most of the U.S. are rising fast enough to outstrip the inflation rate of about 2.5%. And there are many hot spots. The Midwest is seeing some of the biggest leaps, while house hunters in such cities as San Francisco, Seattle, New York and Boston increasingly find they must pay more than the asking price to win a bidding war. Nationally, the median sales price for existing homes will be up 5% this year and an additional 6% next year, the National Association of Realtors (N.A.R.) projects.

As investments go, that's not exactly blowing the roof off. But take risk into account and tack on the tax and leverage benefits of a mortgage, and you have an asset that in coming years just might (gulp!) beat the stock market. Should you sell all your stocks and hire a carpenter? Of course not. For convenience and superior long-term returns, stocks remain the way to go. But real estate rises about as fast, and while you can't easily sell your house to capture the gain, you do get to live in it. Here's why it's O.K. once again to view your house as an investment:

--Low interest rates. They make financing a house easier. Monthly payments on a 15-year mortgage are lower than the monthly payments were on a 30-year mortgage of the same amount two decades ago, when rates were much higher and home prices were rising 20% or more a year. You can't get that kind of appreciation even in today's hot spots. But in theory you can own your house twice as fast.

--Relative value. Many housing markets only recently emerged from the ashes of that mail-the-bank-the-keys, late-'80s decline. So there's little risk of a new meltdown. The renowned real estate bargain hunter Sam Zell has been building one of the nation's largest portfolios of apartment buildings. Meanwhile, the way the sky-high stock market has been bouncing has some folks fretting that a tumble is in store. This may be a good time to take some stock gains and invest in larger quarters. "It's a way to diversify," says Bob Van Order, economist at mortgage reseller Freddie Mac.

--Strong economy. With unemployment low and concerns about corporate job cutting abated, consumer confidence is high. Demand for housing is bursting at the seams. Luxury builder Toll Bros. recently posted record quarterly earnings, revenues, signed contracts and back orders. Through July, existing homes were selling at a record annual rate of more than 4 million. Much of the activity is baby boomers' trading up to bigger houses, a trend that N.A.R. economist Fred Flick says will persist. So there's no reason to expect house prices to lose out to inflation in the foreseeable future.

A house as an investment is a pitch that hasn't opened many doors lately. But today, home isn't just where the heart is; it's where the smart money is too.

Daniel Kadlec is TIME's Wall Street columnist. Reach him at kadlec@time.com