With the huge run-up in local real estate prices in recent years, a house has become much more than a home: a status symbol, a major financial asset and, some economists tell us, an incentive to spend.

When stock prices soar, or when home prices go through the roof, the owners feel more prosperous. And that can lead to what economists call the "wealth effect," or the tendency to spend more and save less when major assets have risen substantially in value.

In the late 1990s, when the stock market was booming, the wealth effect was estimated to be about 3 percent to 5 percent. That is, for every $100 in stock appreciation, the typical investor would spend an extra $3 to $5.

Recent studies suggest that the effect is even more pronounced with expanding housing wealth, as much as $9 per every $100 in equity. Certainly, in North County, homeowners have enjoyed watching the value of their properties double or even triple since the turn of the century.

The downside, of course, is that declining values can put the brakes on consumer spending. As we reported Sunday, some North County companies, such as flooring stores and landscape architects, are already seeing revenues decline as home sales drop and prices flatten.

The signs are clearly visible - or I should say, not visible. A year ago, you couldn't drive through a neighborhood without having to run a gauntlet of home-improvement equipment: cement mixers, roofing trucks and painters' ladders. Now it's a straight shot.

Remodeling activity is expected to continue slumping, according to the Remodeling Activity Indicator, published by Harvard's Joint Center for Housing Studies. The October indicator shows that the nation's homeowners are still heavy into remodeling - $160 billion in the third quarter ended Sept. 30 - but down from a multiyear peak of $170 billion in the first quarter.

Robert Brown, a Cal State San Marcos economics professor who tracks local home prices for the North San Diego County Housing Affordability Index, or HomeDex, says it's no surprise that homeowner spending is falling. With rising interest rates, those holding adjustable-rate mortgages or home-equity loans must spend more just to stay in place.

And it's little wonder that home sales are slowing. Ultimately, says Brown, rising prices keep even homeowners with lots of equity from moving up because they don't want to pay the higher selling costs and higher property taxes: "This appreciation locks people into the homes they're in."

- Contact Business Editor Ann Perry at (760) 740-5444 or aperry@nctimes.com.