I recently enjoyed watching a reporter's attempts to dismiss the strength of the Atlanta real estate market. He stated that "while the current round of interest rate increases has yet to be felt in the housing market, it is only a matter of time" until buyers begin to balk at current prices and interest rates.

Meanwhile, the Office of Federal Housing Enterprise Oversight reports that average home prices nationwide increased 7.71 percent from the first quarter of 2003 through the first quarter of 2004 while the price of other goods and services grew at a rate of 1.59 percent.

Residential real estate continues to be one of the bright spots, with most homes selling in reasonable times and prices generally showing strength. This has been especially the case with entry-level homes as renters and young workers made the jump to ownership.

What are the underlying reasons motivating buyers? I believe there are three, and they apply across all price levels. Anyone with a stake in real property would do well to understand them.

1. The best investment

Owning a home is part of the American dream, whatever that is.

This reason is primarily financial, and the idea is that ownership is tied to wealth accumulation.

When you ask first-time buyers why they're willing to pay more to own than to rent, the answer typically has to do with "wasting money on rent" and "wanting to make an investment."

For most Americans, the best investment is in their own home. Young couples frequently see the purchase of a home as a "rite of passage," allowing them to begin building an estate. Older buyers se the financial benefits as hard to resist.

Although inflation is almost nonexistent now, homes are appreciating faster than other costs. The almost inevitable conclusion: Why not own instead of rent?

The bottom line is that ownership remains a big way to accumulate wealth.

2. A point of pride

There is tremendous pride in owning real estate.

You may think that "pride" plays an insignificant role in buying. But I would say you are wrong.

I believe there is a deep need within most people to have a space they can call their own. Whether it's a ranch style on a quarter-acre with a white picket fence or the inside of a high-rise condo in Buckhead, most people recognize the difference between a house and a home.

3. Strong tax benefits

The long-term tax benefits of homeownership are strong.

The government provides subsidies for those who will follow the path perceived to be in the public interest. In this case, that interest is clearly away from renting and closer to ownership.

The societal benefits of community involvement and citizen responsibility may or may not be attached to owning a home, but Congress has made no effort to moderate its favorable tax treatment of homeownership.

For example, you could make a case against the deductibility of mortgage interest for those whose income exceeds a certain level on the basis that rates are already low and these individuals probably are homeowners regardless of the deduction.

But instead of limiting this tax break, Congress has sweetened it. Not only is interest deductible for those with home loans of up to $1 million, but an additional $100,000 in debt can be used for any purpose and still remain deductible. This loophole has allowed millions of well-to-do homeowners to use a technique known as "debt-shifting," giving themselves a tax break for otherwise nondeductible debts.

As I talk with homeowners at all levels, I come across these three basic factors influencing the decision to buy: pride, wealth accumulation and tax benefits.

Each adds to the lure of residential real estate. In combination, they weave a potent mix of psychological and financial indicators.

Over the next several weeks, we will look at each of these motivators.

Next week: Homeowners benefit financially at almost every level of the economic ladder. Will this continue?

John Adams is a broker and investor. His Web site is www.money99.com.