Putting money in your home is no substitute for investing. However the money or cash flow you use to support your home in most cases is not money spent but money used to support an asset that ultimately will increase your net worth and eventually your long term security.

As the stock market slumped, you probably felt relieved--perhaps elated--to see the value of your home soar. Indeed, since 1995, housing values in the U.S. have grown from $8.4 trillion to $13.4 trillion. From 1998 to 2005, single-family home prices rose an average of 8.2% a year nationally, with houses in some markets doing even better (see the map below for gains by metropolitan area and forecasts for this year and next). Little wonder, then, that many Americans have come to view real estate as a more secure path to wealth than the stock market, taking out ever-bigger mortgages and trading up as quickly as possible.

To be sure, owning a house provides substantial financial benefits. For many Americans, it's the source of the bulk of their wealth. The typical middle-class family has, on average, some 60% of its net worth tied up in a home. But you shouldn't count on home ownership to make you rich. In fact, figuring out how your home fits into wealth building can be a complicated analysis. Here's why.

Putting money in your home is no substitute for saving and investing. The key reason is that a house represents a much different type of wealth than a stock and bond portfolio does. For one thing, it's not liquid--it can't be converted to cash with a phone call. It takes time to sell a house--and you can't be sure of its actual value until you find a buyer.

More important, you have to live somewhere. So even if you sell your home, it won't help support you unless you buy a cheaper place and stash the profits elsewhere. But that seldom happens--almost invariably home owners trade up to bigger, more expensive places. What about tapping home equity for retirement? A lot of people do downsize when their children move out and they are ready to retire, or retirees will sell high-priced homes in the Northeast and buy cheaper places down South.

But for the most part, retirees don't cash out--unless forced to. Most retirees prefer to stay where they are; others may move to retirement communities or condos that cost as much as their former homes. If you're decades away from retirement, it's important to discuss plan whether you will cash out at a profit--or if you will even want to sell or if you will move relocate etc..

Home ownership does provide both financial and psychological advantages, not to mention substantial tax breaks. Home equity can be an important form of diversification; although real estate unless leveraged is unlikely to outperform stocks over the long term, it can do well in years when stocks falter. Owning a home also gives you the flexibility to tap a home-equity line of credit for emergency expenses or college tuition or to take out a reverse mortgage in your later years. (however, one must give interest to the bank to use their money the major downfall to paying off your home) And home ownership often prompts investors to get serious about building wealth and developing a financial plan.

Still, to realize the full benefits of your home equity, you must avoid two hazards of home ownership--too much spending and not enough saving. In recent years, growing numbers of Americans have tapped their equity by refinancing and taking out home-equity lines of credit. As a result, economists say, the average amount of home equity as a share of value has plunged from 78% in 1950 to only 55% in 2000. And all too often, people spend that extra cash rather than invest it. A recent study showed that an increase in housing wealth leads to a greater increase in consumption than does an identical increase in stock market wealth. People have almost a metaphysical belief in the value of their homes - they feel the values are somehow more permanent than gains in the stock market, so they feel even more wealthy and more willing to spend.

But that wealth could prove illusory. After all, you can't expect continued double-digit gains. Real estate has seen eras of slow growth and even periodic price declines. U.S. home prices climbed 4.7% on average in 2002 and 3.7% in 2003 and even higher in 2004 before slowing down in 2005, according to real estate forecasting firm Case Shiller & Weiss; but, as most anyone listening to the news in recent months can tell you, some formerly hot housing markets have seen prices flatten or even drop. Most real estate economists are not looking for a crash, but there's bound to be a softening of prices. And over the long run, you can't expect prices to rise much faster than people's incomes, or historically greater than inflation, since that would make homes unaffordable The best reason to buy a home is because it is something you enjoy--over the long term, it will probably be a good investment, but it won't make you rich.