With five-year home price appreciation gains in double-digits for all 50 states and interest rates at record lows, home owners wisely tapping equity need have little fear of a housing bubble.

The Office of Federal Housing Enterprise Oversight's Second Quarter House Price Index says the nation's housing market has enjoyed a nearly 39 percent rate of home price appreciation since 1997, with more the half the states and the District of Columbia enjoying a 5 percent growth in price appreciation during past year.

The federal over seer of Fannie Mae and Freddie Mac says any housing market downturn isn't likely to fall as far as prices have risen and over time, banking on real estate is not a risky investment.

"Even in these areas that sometimes demonstrate bubble type behavior, cumulative declines have almost always been much smaller in absolute magnitude than preceding increases during the upward portion of the cycle. Over a full cycle during a 12-year period in Boston (from the third quarter 1982 to the first quarter of 1995), for example, housing appreciated at a healthy annual average rate of more than 4 percent. In San Francisco and San Jose, yearly increases average between 2 and 3 percent annually during a complete up and down cycle (of about 12 years). So regardless of whether or not bubbles occur in given areas, housing has still generally been a good long-term investment," OFHEO reported.

Any loan tied to your home's equity is by nature an equity-depleting loan, but home owners can balance the equity risk and temper their bubble fears by tapping equity wisely.

Capital improvements and investments that provide an equal or better return on your money are the best ways to bank on your home say experts. Home improvements (that add value), education for the kids (to secure their financial future) and new business financing (for an income stream) are relatively better uses of equity than buying cars and boats, debt consolidation and vacations.

Some experts advise never using your equity, but to pay off your mortgage by retirement time so you can live "rent" free when your income is reduced and fixed.

The exception may be for emergencies and unforeseen events that might reduce your income or place added demands on your wages -- job loss, births, illness, injury, death and others. A equity credit line can help you sleep at night if you have nightmares about a job loss or a wage cut.

"If you are afraid of losing your job, get an equity loan now, while you are still employed. That extra cash could tide you over until a new job is found. The good thing about a line of credit is that you don't make a payment until you actually use the funds," said Joette Joseph, a branch manager with VP Alliance Title Company in San Jose, CA.

Published: October 3, 2002

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.