More haves, have-nots. (Comment).

My wife and I thought it would be fun to check out some open houses in Santa Barbara -- you know, for the day when we decide there's more to life than being stuck in your house after a certain hour of the day because traffic has entered gridlock zone.

During our brief house tour, we came upon a two-story condo a few blocks from State Street, the city's premiere drag. Nice. But it had this weird layout in which a closet-sized kitchen was tucked into a corner of an already small living room. No backyard, no A/C, no street exposure, limited parking. Price: $670,000 - and forget about haggling. "We'll have this gone by the end of the week," promised the high-toned real estate agent.

Now we're not country bumpkins when it comes to California real estate. Our small house in Westwood has appreciated over the years to the point where it could be sold tomorrow for a ridiculous amount of money. But what I consider ridiculous others might consider a relative bargain. That's the marketplace for you.

And for the moment, that's what's propping the economy.

Each month, a fresh set of housing statistics defies earlier talk of a slowdown. In January, Los Angeles County saw home sales jump 22 percent from a year earlier and the median price surge 17.5 percent, to a record $235,000. As measured by DataQuick Information Services, it was the largest percentage increase in prices since August 1989. the height of the last buying craze.

Nothing it seems has deterred homebuyers - not recession, terrorist attacks, a volatile stock market, or that $670,000 living room/kitchen combo. The reasons for this are pretty basic: Low interest rates keep down monthly mortgage payments and that 17.5 percent appreciation in the past 12 months contrasts nicely with last year's stock market losses.

Over the years, slumping stocks have corresponded with go-go real estate. Go back to the early 1970s and you'll see a similar pattern. Real estate is perceived as less volatile and more reliable, especially in places like Southern California.

There are some important caveats to this, however. The first is that appreciating home prices are not a given - certainly not at a 17.5 percent annualized clip. Consider what happened in the early to mid 1990s, when the lingering local recession, borne in part over the loss of so many high-paid jobs in aerospace, put an extended chill in the market.

More important is the effect of record-setting prices and limited supply on the region's overall economy. The percentage of L.A. households that can afford to purchase a median priced home, 36 percent as of December 2001, is only slightly higher than Orange and Ventura counties. Plus, the share of households that owned homes last year in L.A. County was at 50 percent, 18 percentage points below the average rate in metro areas, according to the Census Bureau.

As homes get snapped up in this real estate feeding frenzy, many folks will be left behind. Eventually, they might decide to leave the area in search of a housing market they can afford. On its face, that might not seem like a big deal, but when there's too large a gap between those who can afford to be homeowners and those who can't, the economy loses its balance. Amid all our excitement over those 17.5 percent returns, that's a reality worth remembering.

Mark Lacter is editor of the Business Journal.