After a rewarding love affair with homeownership in the Seventies and Eighties, some people feel they've been jilted in the Nineties. Those who bought at the top in California and the Northeast suffered significant losses as prices tumbled. Even between the coasts, values have dipped in spots because of recession.

But the world still favors the American dream - housing remains a good investment. Not everywhere at every time. But in most places, most of the time. An analysis by the Joint Center for Housing Studies at Harvard University shows that if you bought a house in 1983 and sold it in 1991, you would have enjoyed real annual growth in equity of 4% to 22% in 10 of 12 markets studied. The big exception was Houston, where homeowners lost 17% a year owing to the oil-price collapse of the mid-1980's. Boston was a loser after 1987, down 2.5% annually.

That's the past, you say, when appreciation generally kept up with or beat inflation. Fact is, even if the value of a home lags behind inflation by a percentage point or two, leverage makes the equation work for most people: If you put $20,000 down on a $100,000 house and the price rises 3%, that $3,000 capital gain translates into a 15% return on investment. It's really more complicated because of such items as tax benefits and maintenance and selling costs for the homeowner, and returns a renter could earn if he invested the down-payment money. After taking all kinds of subtleties into account, the number crunching still favors buying.

Real estate expert Anthony Downs of the Brookings Institution shows that a homeowner's return on investment in the 1980's was high even in the Midwest, where houses appreciated just 3.6% a year vs. inflation of 4.6%. A buy vs. rent study of individual homes by Merrill Lynch finds that if appreciation lags behind inflation by two percentage points, you still won't lose by buying. Says economist Karl Case of Wellesley College, who closely follows housing prices and investment decisions, "Housing almost always gives you a very good return."

Making the Most Out of a $10,000 Investment

Often overlooked when comparing investment options are the leveraging and tax advantage of purchasing a home. This hypothetical example in the chart below analyzes those benefits over a 10-year period by comparing the experiences of two households. One household used $10,000 in savings as a downpayment on a home; the other buys a $10,000 Treasury bond and continues to rent. Looking at the bottom line 10 years later, the homeowner out-earns the renter by more than $49,000 on the initial $10,000 investment. Both households consist of a husband, wife and one child. Each family has a combined income of $40,000 which increases 5 percent annually. The example assumes a property tax rate of 1 percent of value each year, hazard insurance of .4% of value per year and a marginal tax rate of 15%.