The stock market has been a good investment over the last decade. So has housing in San Diego. And while in the last two years the equities market has tumbled — the Dow is struggling to stay above 10,000 and the Nasdaq is down threefold from its 5,000-plus highs — local real estate values are continuing to charge forward.

In March of 2000, when the stock markets were at all-time highs, the average price of a San Diego home — detached and attached — was $295,246, reports the San Diego Association of Realtors. In the two years following it rose 28.1 percent to $378,272. The weighted average of a new home in 2000 was $371,746, reports MarketPoint Realty Advisors. By the first quarter of this year the average sale price of a new home was up 18.7 percent at $441,295.

With mortgage rates remaining low and appreciation in housing so consistent, it is no wonder that real estate remains a popular investment in San Diego, one people are using to their advantage in many ways.

Michael Reschetnikow, vice president of operations at Global Capital Group Inc., says owners are actively taking equity out of their homes. The money is being used for things such as consolidating debts and financing home improvements. When the stock market was hot, Reschetnikow says homeowners were cashing out equity to jump into the market as investors.

Rising housing values are increasing the net worth of San Diegans, helping them in part ride out the nation’s economic slowdown.

“San Diego is bar none the best city in the country as far as keeping steam in the economy,” Reschetnikow says. “Other parts of the country are hit more by the recession than San Diego.”

As housing values escalate, some owners are leveraging equity into the purchase of additional real estate or income property.

“With the way the market has been the last three or four years, there isn’t a better investment,” says Suzen Sarko, a broker with Realty Connex.

Some home buyers are aggressively playing the appreciation game, moving every two years to capture built up equity while at the same time avoiding capital gains taxes.

Sarko cautions emotional factors go into purchasing a home. And while she’s doing her investing in real estate these days, she doesn’t advise buyers to overextend just to move into the right neighborhood or on the expectation of extraordinary gains.

McCullough-Ames Development says its clients consider buying custom homes like this Street of Dreams winner a better long-term investment than the stock market. (photo/McCullough-Ames Realty, Inc.)

Poway developer Brett Ames says his custom home buyers “absolutely” look at his product as an investment.

“Our homes are really safer investments long term than the stock market,” says Ames, co-owner of McCullough-Ames Development Inc. “We’ve even heard as such from buyers. We’ve seen our sales really move forward as the stock market has slid down.”

McCullough-Ames builds luxury Poway properties that start at about $1.7 million and top out near $3.5 million. Ames says these homes are purchased as long-term investments. With Poway about 93 percent built-out, and McCullough-Ames properties on one- to two-acre lots, Ames says his buyers look at the classic law of supply and demand when making the purchase. The time will come, he says, “when you just can’t build them anymore.”

A countywide look at real estate sales is proof enough of the value of real estate as an investment. The average sale price of a new detached home in Scripps Ranch is $572,926. In 1992 that same home was priced at $265,748. In EastLake, the average sale price is $359,141 compared to $246,890 in 1992.

Still, while thousands of San Diegans and others across the country track and use equity in their homes, most financial planners advise against considering a primary residence as an investment.

Peg Eddy, president of Creative Capital Management Inc., does not include home equity when creating a client’s investment portfolio. “The theory is people have to live somewhere,” she says. “It is physical shelter and it gives tax shelter, but it does not take up an asset class when allocating funds.”

Creative Capital counsels investment diversity. “We believe in liquidity,” Eddy says. “You can’t sell a personal residence, even in this market, as quickly as you can sell a stock or a bond or a mutual fund. I hate to tie someone’s financial future to an asset that can’t liquidate quickly enough if they need it in an emergency. We do not believe (in) trying to build your financial future on a cyclical real estate market, in any community.”

Eddy advises people to pull out equity on their personal property only in rare instances. She would advise using it, for example, in a situation where an investment portfolio had dropped but a child’s college tuition was due.

Financial planner and talk radio personality Bill Holland says it’s not a good idea to include your home in your investment portfolio. “Keep the home separate,” he says. “Don’t jeopardize the home if the investment doesn’t work. You gotta live there. Other things can go sour and you can still live.”

Holland says most lenders want homeowners to keep the equity in their home. If hard times do befall a homeowner with no equity, lenders fear the owner may simply walk away from the house.

Caution also comes from those with memories of the difficult real estate market in 1994 and 1995.

Still, as long as the market remains flat — if it is down at year’s end it will be three years in a row and a first in 40 years — many San Diegans are going to be hard pressed to not look at the increasing values of their homes, and what they can do with that equity.