Many 21st-century homeowners are feeling as if they've won the real estate lottery.
On the East and West coasts, they have seen their home values double, or even triple, over the past five years. There's just one problem: It's all on paper. You can't reap the benefit of all that wild appreciation, or protect it from a blowup in your local housing market, unless you somehow cash out.
For every homeowner who fantasizes about semi-retiring on real estate profits and living the simple life in a bucolic locale, few are truly willing to leave behind friends, extended families, schools and communities. But there's no denying that many harbor fears and worry over how can they protect the home equity that makes up a large part of their wealth.
There's no perfect solution. Empty-nesters can cash out and downsize--and tuck their profits someplace safe--but they may run into tax snags. Risk-takers can refinance to cash out profits and invest them in the stock market or more real estate. But if your house does fall in value, you could end up with more debt than the place is worth--and investment losses to boot.
Source: Kiplinger's Personal Finance, April 1, 2005