Everywhere I go, people ask me if Atlanta real estate prices are now in a bubble, and if so, when is the bubble going to burst?

It seems that folks just find it hard to believe that Americans still see solid value in their homes, and prefer to invest there rather than take a chance on the stock market or other opportunities.

Not that residential real estate’s solid string of value increases should surprise anyone. Atlanta home values have remained solid while staying affordable as well. The federal government says housing prices in our metro area have not decreased overall in any calendar year since they began measuring in 1977.

And according to the National Association of Realtors, the median sales price of an existing single family home in the Atlanta area is now around $156,800, while the national average price is $183,800. No wonder relocations to the Atlanta area are sought-after business among local brokers - they are relatively easy to sell.

Nationally, the housing market expansion has seen four years of unprecedented high sales figures, and NAR economists are looking for the market to take a breather in 2005. That doesn’t mean a slow year or lower prices, it simply means that they are not projecting another record high year in 2005. Even so, next year may very well turn out to be the second best in history.

To give you an idea of the numbers involved, let’s look at projections from David Lereah of the NAR. He is now projecting that 6.49 million existing homes will sell during the current year for an all-time high record, and that sales will pull back next year to 6.25 million.

And with Atlanta continuing to offer a strong service sector, a good stock of existing homes, and a great location in the Sunbelt, our sales should do just fine, thank you. The constant drumbeat of a housing bubble will just have to wait for another year (or decade).

While predicting that home sales will fall a bit, Lereah looks for home price appreciation in 2005 to remain healthy, posting a robust 5.3% nationally, according to his projections. His latest letter says "There will be no popping sounds in 2005, just a little air coming out of a balloon."

He goes on to cite four reasons residential property will escape the drastic decline seen in the stock market, built-in benefits that other assets lack:

* Social benefits of home ownership, including family pride, community involvement and reduced crime. A family that owns their own home is more likely to be "invested" in the community, and that makes for better communities and better neighbors. The remarkable statistic here is that we are approaching a 70% ownership rate in this country, a figure unmatched elsewhere in the world.

* Because of its leverage, real estate generates high returns on invested dollars and creates significant wealth through debt amortization and steady price appreciation. Nationwide, prices have not dropped in the 30 years the government has kept statistics. Certain areas have become overheated, and that has led to price reductions in those areas, but overall home prices have remained stable and appreciated.

* Real estate ownership expands your borrowing and buying power, allowing you to borrow against the equity in your property. Home equity lines of credit are used for all manner of purchases, from education to cars to investments to vacations. The important point is that the power is in the hands of the consumer. And finally

* Real estate brings with it remarkable tax benefits and government subsidies that no other income-generating asset can match. Simply owning and occupying your home for a two year period qualifies most couples for an exclusion of up to half a million dollars in profits from any taxation whatsoever. And that’s just the beginning of tax benefits and subsidized rates and programs available for today’s home buyer and owner.

While we all recognize that anything can change in the future, I see no major shifts in the road ahead for residential real estate. Freddie Mac is expecting rates on 30-year fixed rate mortgages to average around 6 percent in 2005, as a controlled recovery creates new jobs and sees businesses expand. So long as housing remains affordable, I expect to see the Atlanta housing market remain strong.

Speaking of affordability, the most recent issue of REAL ESTATE OUTLOOK reports that the Housing Affordability Index - a statistical measure of the average family’s ability to purchase a median priced home - has inched up to its highest point this year. This means the average family still has the income necessary to buy a home.

The Affordability Index calculations are driven by three major factors in the homebuying decision: mortgage rates, median home prices, and family income. The Index is down slightly from last year, showing that conditions are less favorable than they were in late 2003. The forecast for the Affordability Index is that it will be another year before income growth matches home price appreciation, thus allowing an increase in the Index overall.