Home prices are all over the front page of the paper these days. This is because after years of rapidly growing prices, appreciation is decelerating or even turning into depreciation. What exactly does this mean for your wallet and future? A few things really.

What is Price Appreciation

Price appreciation is defined as the increase in value of an asset. Somebody is willing to pay more for something today, than in a certain point in the past. As related to real estate, this usually means the demand for homes has increased or the supply of homes has decreased. Scarcity causes pricing power. Homeowners have more power during negotiations and as a result buyers will find ways of giving them what they want.

Home Equity

Home equity is the increase in worth due to price appreciation. Think of equity as the cash that you have made by owning the home. But equity can be destroyed or withdrawn. Equity can be decreased in a number of ways. Here are a few examples:

• Rising interest rates
• Rising inflation
• Housing market collapse

If you have an adjustable rate mortgage, it's quite likely that at some point in the future you will be paying more for your loan. When interest rates rise it costs you more to finance your home. Suddenly, your real estate just became more expensive.

Inflation is the ultimate destroyer of wealth. When prices of everything go up, personal savings is worth less.

And just because your home is worth a price today does not mean it will be worth that price in the future. (Imagine what a toxic waste dump would do to your real estate?) Seriously, real estate prices tend to go up over time, but depending on when you purchased, where you purchased, and when you have to sell, price gains can disappear into thin air.

For more information on housing visit www.realestatejournal.com or www.bankrate.com.