For anybody who tracks home appreciation rates, the latest federal numbers are both stunning and sobering:

* The average home in the United States gained in market value by 9.4 percent from mid-2003 to mid-2004. That increase is more than three times the rate of inflation for goods and services in the overall economy during the same period, as measured by the consumer price index.

* Average gains in a record 74 metropolitan housing markets were in double digits for those 12 months. Ten markets had price gains of more than 20 percent, topped by Las Vegas, where the average increase was a casino jackpot -- 25 percent.

* The Washington area, including the District and portions of Maryland, Virginia and West Virginia, had a 15.4 percent average gain in the value of homes. Houses in the District itself gained even faster on average -- 16.1 percent.

* No metropolitan housing market experienced net losses in average home values last year, and only two states -- Texas and Utah -- had an average housing appreciation rate below the 3.03 percent rise in the consumer price index.

* Some regions of the country, especially the South, Midwest and Mountain states, experienced more modest gains than the national average -- in the 4 percent to 6 percent range. But those same regions traditionally have been less volatile than the high-froth, high-cost West Coast and East Coast markets.

If you are a homeowner or prospective buyer, what can you make of this latest, heady data? Everybody loves to hear that his home is worth more than it was a year earlier. But how long can prices keep surging before houses become too rich to afford, and the home appreciation party comes to a jolting, sobering end?

After all, the average sales value of a house in the District is up by 95.1 percent during the past five years, according to the Office of Federal Housing Enterprise Oversight, the agency that monitors home appreciation every quarter. That is nearly a doubling in value of a typical home in just 60 months.

Yet average household incomes in the capital certainly haven't doubled since 1999. Ditto for Rhode Island, where home values have jumped by 88 percent in 60 months, or California (up 84 percent) or Massachusetts (up 74 percent). How can buyers afford these inflated prices, and where are the usual cyclical restraints that cool down overheated pricing environments?

There are a couple of factors at work. To begin with, many of the highest-gaining metropolitan markets have strong employment bases, below-average rates of unemployment, and household incomes far above the national average. Repeat buyers in these areas tend to have substantial equity that they can move tax-free to new purchases, even at significantly inflated prices.

Then there is the essential ingredient powering high housing inflation nationwide: the low cost of money and its impact on home-buying demand.

Thirty-year mortgage interest rates hit a four-decade low of 5.23 percent in June 2003, hovered in the 5.6 to 5.7 range early in 2004, and slipped back to 5.45 percent this spring. Extended periods of interest rates below 6 percent are almost unprecedented in modern American mortgage history, and there are no signs of a sudden spike upward at the moment.

Lower-cost mortgage money allows home buyers to afford larger mortgages and pay higher prices for homes without a corresponding increase in income. That, in turn, converts pent-up demand into effective demand -- home sales -- at every rung of the price ladder.

David Lereah, the chief economist for the National Association of Realtors, says the key to the equation is not simply low interest rates, but also low household debt service ratios. This means the ratio of regular monthly debt obligations -- mortgages, credit card payments, auto loans and so on -- to gross monthly household income.

In the early 1980s, according to Lereah's research, typical household debt ratios exceeded 30 percent. That is, a family's total debt service payments ate up 30 percent or more of household income each month. In the late 1980s and early 1990s, ratios dropped into the 22 percent range. Currently, by contrast, average household debt service ratios are in the 17 percent to 17.5 percent range.

Lereah says that home sales and price appreciation soften whenever debt service ratios exceed 22 percent, but don't begin to drop significantly until debt service ratios exceed 30 percent. By his calculations, it would take 30-year mortgage rates of 8.5 percent or higher to push household debt service ratios to that level again.

Does that mean near-record average appreciation rates are here to stay? Hardly. Most economists agree that interest rates are likely to rise over the coming year or so. Given that consensus scenario, figure on more moderate gains in value in the months ahead. The appreciation party won't be over. The noise level will simply dip a notch or two.

Kenneth R. Harney's e-mail address is kharney@winstarmail.com.