Strong growth in real estate holdings offset much of the decline in direct and indirect holdings of corporate equities. In fact, after being eclipsed by stock holdings in 1999 for the first time in the 55-year history of this data, the value of real estate holdings regained dominance in household portfolios late last year. Real estate managed to regain its position not only because of sinking equity prices, but also because of very strong house price appreciation, coupled with an increasing rate of homeownership. While spending will be modest, sturdy household balance sheets, combined with still robust job and income growth , will keep consumers well above water. It will take a more persistent decline in equity prices before the reverse wealth becomes more dramatic, and if there is a stock market rebound, the reverse wealth effect may not do much damage at all.
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