A house appraised at $500,000 two years ago now sells for $400,000. "We've lost $100,000" wail the neighboring homeowners, who bought cheaply and expect their property values to soar each and every year. But that "lost" $100,000 is fantasy money, say real estate experts. How can you lose something you never really had?

Home sweet equity. Is the family dwelling a place of shelter and warmth, or a canny investment, destined to pay off big? Barraged by advertisements for easy financing and enticed by television shows portraying trading up or "flipping" a house as the smart thing to do, an increasing number of homeowners are viewing their primary residence less as a place to hang their hat and more like an endless money machine.

"Your home is your biggest, most valuable investment. You shouldn't abuse it," advises Erica Sandberg, spokeswoman for Consumer Credit Counseling Service of San Francisco.

Second mortgages. Refinancing. Home-equity loans. Reverse mortgages. Buying a place with no money down and interest-only loan payments. It's all so easy to do. Just sign on the dotted line, get what you want now and it will all work out later, right?

"It's not acceptable to be overly optimistic," Sandberg cautions. "You need to look into the future and say, 'What happens if I lose my job, what happens if my partner loses their job, what happens if the interest rate goes up?' Get rid of the idea that you'll be able to make it somehow. That philosophy gets people into trouble really fast."

Home-equity loans are easy to get and offer lower interest rates than credit cards. Pull a little cash out of the old homestead and put in a fabulous kitchen, send a kid to college, buy that dream car or boat. What's the harm? Your house is worth it, and why not have the money now rather than later?

"You can really overuse your equity," Sandberg warns. "You can take out too much to where you tap yourself out."

And if you take money out of your house now, don't expect to get that same amount again later when you sell. The buy-buy-buy and borrow-borrow-borrow mentality is harmful to many people, Sandberg says. Some folks purchase a pricier place than they can afford, using fancy financing and scrambling to make the payments each month on the gamble that the property will be worth a lot more in the long run. Others use home-equity loans or second mortgages to pay for I-want-it-now luxuries or to cover daily expenses, blithely assuming they'll be able to handle the extra payments. Homes have taken over the role of savings accounts.

"You still need cash to cover yourself in an emergency," Sandberg explains. "That's not the purpose of a credit card, and that's not the purpose of your home."

Welcome to the complex world of personal real estate, where homeownership is an important investment, but not in the same sense as income property, stocks or bonds. A home is a long-term asset, existing in a market based on supply and demand. Even when prices drop, owners still have a place to live. You can't live in a stock or a bond.

Older people still tend to pay off their mortgages and own their homes outright before retirement, says real estate agent Golly McGinty. It's younger generations who sometimes view their houses as the equivalent of giant ATM machines.

"It's like putting candy in front of a baby; you've got it, why not use it?" she says.

When the real estate market was hot and homes were appreciating 10 to 20 percent or more annually, people gambled that home values would quickly build back the equity they had sucked out through loans. But then the market leveled off, and some folks ended up owing more than their house is currently worth.

"Real estate is not a crap game. Real estate shouldn't be thought of as gambling," McGinty emphasizes. "If you want to gamble, go to Reno and put your money on the table. If you want to own a home or invest in real estate, that's different. And those are two different scenarios, owning a home and investing in real estate."

It helps to have a long-term perspective, advises agent Beth Egan.

"Real estate is very psychologically driven," Egan says. "If there's only one item and four people want it, the value goes up. And I think the media plays into it very, very heavily."

When the market was hot, the media urged people to buy immediately or get locked out of homeownership.

"What happened was that people had this false sense of value," Egan says. "They took that false sense of value and went and got home-equity lines of credit and took that money and bought boats and cars. We became a society of haves and have-mores."

In an average market, homes appreciate about 3 percent to 5 percent a year, not spectacular, but a steady improvement over time. Historically, Egan adds, homes double in value about every 10 years.

Asked about media hype over the real estate "bubble," Egan rolls her eyes. In her opinion, a bubble is a trend or a fad that's going to become outdated and replaced.

"People are always going to need houses and there is always going to be a certain demand for houses," she points out. "The market will shake itself out, people will come back to a more realistic sense, and the market will correct itself. That's a better word for what's happening now: it's a correction of the market. It's not a bubble, it's a correction."

Mortgage broker Brooks Rumph agrees. "Real estate is cyclical. Everything goes up, everything comes down, everything goes up, everything comes down."

The key is in understanding the details of any type of financing, whether it's a no-money-down, interest-only loan or a home-equity line of credit.

"You have to be very clear what the terms are and what you're doing," Rumph explains.

Be skeptical of flashy advertisements for 1 percent interest rates. They're what's known as negative amortization, where the actual interest rate is 8 percent or more, but payments only cover 1 percent, which means after several years a homeowner actually owes a lot more money than at the start of the mortgage.

"Those ads are so incredibly deceptive," Rumph says. "I get them [mailed to me at home] all the time that look like they come from the mortgage company I work for." They don't. He ends up assisting people who fall for the sales pitch and wind up angry, frustrated and desperate when things don't work out.

Like Sandberg, McGinty and Egan, Rumph believes perspectives on home ownership have shifted.

"Somewhere down the road, people have gone from this concept of shelter and a warm place to live to an investment vehicle," he says. "People have gone from thinking the house that they live in is their home, to thinking, 'Ooh, I'm going to make a lot of money on this structure.'"

Investment property, Rumph says, is just that: an investment. It's not a home. "You're not attached to it. It's not close to your heart--or it shouldn't be."

Although he agrees with Sandberg and other credit counselors that homeowners should be careful about tapping into their home's value, Rumph says home-equity loans can be good if used judiciously.

"In a perfect world, you wouldn't use an equity line except for home improvement. In the real world, people don't save. An equity line can help people get through six months of trouble."

However, applying for a line of credit while times are good, Rumph says, is a safety net.

"Life gets in our way and you never know what's going to happen. It's harder to get an equity line of credit when you get laid off than if you're employed and taking it out just in case. Better to eat a little bit of equity than to lose your home in times when you lose your income."

Sandberg, McGinty, Egan and Rumph may disagree on exactly what property owners should do, but they agree on the fundamentals. "Get as much information as possible and understand your loan programs. That's a big key," Rumph concludes. "Don't get into something you don't understand completely."

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