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Big Boom Theory

Is the housing market stealing away high-tech dollars?

This story appears in the January 2006 issue of Entrepreneur. Subscribe »

During the dotcom boom of the late 1990s, investors couldn't get enough of the high-tech stock sector. That is, until the bottom fell out. Since then, investors have been flocking to the red-hot housing market. But while homeownership has hit record levels, high-tech innovation may be suffering in its wake.

"In the late '90s, the economy was being propelled by a once- or twice-in-a-lifetime surge in investment in high technology," says economist Marshall J. Vest, director of the Economic and Business Research Center at the University of Arizona in Tucson. "Of course, investment in high technology improves productivity, wages, the standard of living--there's a big payback when you invest in technology. [In] the past few years, the economy [has been] driven by investment in real estate. While money has been flowing into real estate, it has not been flowing into the kinds of investments businesses undertake to make themselves more productive."

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