It's probably your biggest single asset.

It may also be your biggest single liability.

No, I'm not talking about your hair. I'm talking about your house.

Once upon a time, early in my Foolish writing career, I wrote a cheeky article calling a house "the best investment ever." What I was trying to say was that home ownership was heavily favored from a tax perspective and delivered rewards that went beyond financial returns, and that those rewards deserved to be considered when allocating your money, but that didn't stop certain green-eyeshaded Fools from taking me literally and taking me to task.

Of course, they were correct then -- the historical rate of return on residential real estate, even before the recent crash in prices, is lower than the historical rate of return on stocks -- and those recent events have put things in a rather stark light. In 2008, Americans' collective home equity fell below 50% for the first time since the end of World War II. We now, as a homeowning nation, owe more than we own.

And given that home ownership is a critical part of many folks' long-range financial plans, that's a development that needs a closer look in the context of all that's happened in the last year.

Coping with a changed landscape
It isn't just the housing market collapse that has damaged the retirement hopes of so many. Nearly everyone's retirement fund lost money in the stock market crash last year. And although many of those who invest mainly via IRAs or brokerage accounts have managed to make up ground in recent months by making good buys at the market lows, those whose nest eggs are in 401(k)s haven't all been so lucky.

The investment options in most 401(k)s, of course, are mutual funds. Nearly every U.S. equity mutual fund lost ground last year. And despite the recent rally, many of those funds are still lagging, thanks to big investments in seemed-like-a-good-idea-at-the-time stocks like these:

Stock

2-Year Avg. Annualized Return

Number of Mutual Funds That Own It

Nokia (NYSE:NOK)

(31.6%)

1,083

American Express (NYSE:AXP)

(27.3%)

1,254

Pfizer (NYSE:PFE)

(13.4%)

2,107

Bank of America (NYSE:BAC)

(37.9%)

1,901

Boeing (NYSE:BA)

(33.1%)

1,030

Simon Property Group (NYSE:SPG)

(11.5%)

709

Autodesk (NASDAQ:ADSK)

(27.6%)

714

Source: Yahoo! Finance, MFFAIS.com. Data as of market close on Aug. 5, 2009.

Now, those stocks -- and those funds -- may yet recover. In fact, they probably will -- if we wait long enough. But with housing, we may not be so lucky. A recent University of Utah study states that after peaking at nearly 70% in 2004 and 2005, home ownership rates will fall to an estimated 63.5% by 2020. That would match its lowest levels since 1985, and arguably means that the resulting reduction in demand will keep home prices from rising anytime soon.

Long story short, we aren't going to see the likes of 2006-vintage property values for a long, long time. And that means we need to get creative about turning a depreciating liability into a retirement asset.

What you can do right now
In this month's issue of the Fool's Rule Your Retirement newsletter, available online at 4 p.m. EDT today, Foolish retirement guru Robert Brokamp takes a look at a few simple steps you might be able to take now, steps that can help maximize the value you'll be able to get from your home once in retirement.

Some of these steps are simple and obvious: For instance, many folks would benefit from refinancing now. But even if refinancing wouldn't significantly lower your payments, it might be worthwhile anyway -- for instance, going from an adjustable-rate mortgage to a fixed-rate one might not save you any money now (in fact, it might raise your payments), but it removes the risk of future rate adjustments that could -- probably will -- cost you a lot down the road.

Some of the other steps Robert suggests are less obvious, and worth serious consideration as you try to figure out how to make your old retirement dreams happen in this cold, new financial world. If you own a house and you're worried about retirement (aren't we all?), it's definitely worth a few minutes of your time. Happily, that's all it will cost -- full access is yours free with a 30-day trial. Click here to get started.

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Fool contributor John Rosevear sure hopes Autodesk shares continue to recover, because he owns some. He has no position in the other companies mentioned. American Express, Nokia, and Pfizer are Motley Fool Inside Value picks. The Fool owns shares of Autodesk and American Express. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.