It may not be an anniversary to celebrate, but March 12 marked four years since the Nasdaq Composite Index hit its all-time high of 5048.62.

These days, the index is about 75 percent below that record, even after last year’s gain of 50 percent. It would take huge gains to return to the peak anytime soon – gains so big as to constitute another bubble like the one that got us there the first time.

The other big indexes, the Dow Jones industrial average and Standard & Poor’s 500, also are below their early 2000 highs – by 11 percent and 25 percent, respectively.

And yet, the Federal Reserve recently reported that the net worth of U.S. households had hit a record at the end of 2003 – $44.41 trillion – topping the high mark set in those heady days of early 2000.

Are we really better off than back then? I don’t think so.

Net worth has gone up, in part, because investors have continued to put part of their earnings into stocks, bonds and other holdings. So even though the pre-2000 investments may not have fully recovered, lots of investments purchased during the market trough of 2001 and 2002 have enjoyed smart gains.

That’s good: Investing during downturns is the only way to get returns matching long-term averages. People who kept investing through the bear market deserve a pat on the back.

But we’re far below where we’d have been if the market had held up and we’d also continued putting new money in. Moreover, we have four fewer years to retirement, and prices have gone up.

The second reason we’ve set a new net-worth record is soaring home prices. This news is, at best, bittersweet. Growing wealth that comes from rising home prices is more illusion than reality.

If your home doubles in value, the gain won’t necessarily turn into cash in your pocket because other homes are doubling, too. You’ve got to have a place to live – so even if you sell, you may have to use all the proceeds from one home to buy the next. You’re not gaining ground.

Unless, of course, you’re prepared to downsize – to move to a home that’s less expensive. This may be a good idea when your children have grown and you’re sick of taking care of a big place. But if you’re forced to downsize in order to free up home equity to pay the bills, it’s hard to see that rising home prices have really made you richer.

Instead of selling, you can pull cash out of your home by taking out a home equity loan or refinancing to a new mortgage for more than you owe on the old one.

By some estimates, Americans last year took nearly half a trillion dollars out of their homes this way. We’re on an equity-extraction binge, piling up debt that will have to be paid.

Only in the most unlikely circumstances will you come out ahead. Suppose you used refinancing to pull $50,000 out of your home. If you paid 6 percent on the loan and invested the money at 10 percent, you’d earn 4 percent. Sounds great.

But I doubt many people are doing this. There’s no way to get a guaranteed return over 6 percent.

Most people extracting home equity are spending the money – on things such as new cars or paying off credit-card debts that will then be run up all over again.

Indeed, the Fed’s March 4 “flow of funds” report said total household borrowing grew at an annual rate of 8.3 percent in the fourth quarter of 2003, while mortgage debt rose at a 10.5 percent rate.

By tapping home equity, Americans have been able to continually increase their spending even though wages are practically frozen.

But if interest rates rise, refinancings and equity loans will fall off, consumer spending could shrink and the recovery could falter.

Even if that doesn’t happen, homeowners have saddled themselves with immense long-term debts.

So the new net-worth record hardly puts us back where we were four years ago. We’re poorer, not richer.

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(Jeff Brown is a business columnist for The Philadelphia Inquirer. E-mail him at brownjphillynews.com.)

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(c) 2004, The Philadelphia Inquirer.

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