The first half of the last decade caused many homeowners around the country to believe that there would never be a better long-term investment than owning a home.

In the last five years or so the same group is wondering whether their respective homes will ever sell for the prices seen at the peak of the boom, or even for what the tax assessor seems to believe the houses are worth right now.

If it makes you feel any better, recent developments have made it more likely that your house will be worth much more in the future -- just not in a way that will make you feel any better about it.

Here's why, and what you should do now to improve your odds of making more money on your most precious "investment."

Some help from Uncle Sam

A few weeks ago the Federal Open Market Committee announced plans to purchase hundreds of billions of dollars of Treasury and mortgage-backed securities.

In the short term, one of the effects of this move was that long-term interest rates dropped to lows never seen before -- especially on 30-year home mortgages.

The financing giant Freddie Mac said that the 4.85 percent rate available nationally on 30-year loans was the lowest since they began tracking it almost forty years ago.

Low rates = higher inflation?

The larger and longer economic affect of this flood of money into the markets is uncertain. But a probable outcome is that we'll see higher inflation at some point in the future.

That means that dollars will continue to decline in value (meaning that in the future it will require more dollars to buy a certain set of goods and services than it would to buy the same set today).

So the home you own today might be worth more dollars in the future, but those dollars will be worth less (and hopefully not worthless).

In other words, if you sold your home today, the proceeds might allow you to buy more goods and services now than if you sold your home in the future -- even if the dollar amount of the future sale is much higher than what you could sell your home for today.

Whipping inflation then

Another reason that you may not see large, long-term increases in home prices is that when the Federal Reserve tries to slow or halt inflation, the primary tool they use is raising interest rates.

Although this move is usually effective in eventually slowing inflation, it also tends to put the brakes on the economy, which tends to put the brakes on rising home prices.

To make matters worse for homeowners hoping for increasing home prices, rising interest rates also means higher mortgage rates, which, all other things being equal, likely means lower home prices, as well.

What you can do

There are a couple of strategies some investors use to hedge against the prospects of inflation, including the purchase of gold or other precious metals, or buying into a mutual fund that trades in commodities or natural resources.

But one of the simplest ways to partially protect yourself against the ravages of inflation could also be one of the smartest.

How? By taking advantage of the aforementioned record-low mortgage rates to refinance your home mortgage, or even take out a new one.

It's certainly not a move for everyone. But if you are one of the relatively few, and the inflationary scenario comes true, in a few years you'll find yourself making mortgage payments that are technically for the same fixed dollar amount, yet in reality those dollars will be worth less and less as time goes on.

Meanwhile, the cash that you receive from your home equity today can be used to improve your money situation now, as well as provide a cushion against inflation and other future financial calamities.

But what you do with those proceeds is very important. Next month you'll find out if you should even consider opening up a new 30-year mortgage, and, if you do, what your best bets will be with the money you receive.

In the meantime, you may want to make an appointment with a friendly lender at a local bank or credit union.

-- McKinley bought his first share of stock at the age of 14, and began working for an investment firm at 17. After graduating from the University of Wisconsin with a degree in economics and history in 1988, he became one of the youngest licensed financial advisors in the country. He is now a Certified Financial Planner practitioner, and owner of McKinley Money LLC, a registered investment advisor in Eau Claire, Wisconsin that provides fee-based financial planning and investment management to individuals and families. Read McKinley's complete bio

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