For most people, their biggest financial asset is their human capital, because most of the money they will ever get comes from their salaries. Their financial future depends on their ability to get raises and promotions.

The next most important asset is retirement savings, which are usually tied to employment and may include company stock. After that? The house.

So what happens to workers who seek to increase their biggest asset and get transfers, or who receive great job offers in different towns, or those workers who find that their jobs are no more?

If they live in places with diverse economies and mobile populations, they may make out very well on the sale of their house, even after paying a 6% commission to the real estate agent and spending money on up-to-date floor pillows and Pillsbury cinnamon rolls to entice open-house visitors.

But if they are relocated to West Virginia or Nebraska, or put out of work in Detroit or Canton, Ohio, then they face a stern test of their financial mettle and a major real-estate decision.

Of course, owning residential real estate is a pillar of a personal financial plan. It allows people to capitalize their lifetime cost of housing, gives them some income-tax subsidies and offers them the freedom to live with walls painted any color imaginable. And over the long run, real estate tends to appreciate.

Between 1980 and the first quarter of 2007, the average house in the U.S. appreciated 309.75%, an average of about 5.3% per year, according to the Office of Federal Housing Enterprise Oversight, part of the Department of Housing and Urban Development.

By contrast, the average annual inflation rate measured by the consumer price index was 3.4% for the same period. But the numbers vary widely from place to place. Homeowners in 23 states didn't, on average, beat inflation.

The average house in Oklahoma or Texas doubled in price between 1980 and 2007, and that sounds pretty good -- until you consider that inflation increased even more.

With inflation of 3.4% during the period, the average annual appreciation of a house in Oklahoma -- 2.7% -- means that homeowners in that state lost ground. They paid for the privilage of staying there with reduced purchasing power.

This underscores the dangers facing homeowners who have too much net worth tied up in their homes. When Enron went under, many employees both lost their jobs and their retirement savings because they had put their 401(k) funds into company stock.

That failure to diversify also applies to residential real estate. Homes aren't liquid, and they aren't portable, so just like the pain inflicted on employees who let company stock dominate their 401(k)s, putting too much money in your house, without considering ability to sell, ties you to one place, and that may not be a place you want to be.

In 1997, Andrew Oswald of the University of Warwick, U.K, published research showing that American states and European countries with the highest rates of homeownership also had the highest rates of unemployment, because people either will not or cannot sell their houses to get new jobs.

The effect seems more pronounced in smaller cities with few employers. Chicago can absorb the loss of 4,000 jobs at

Motorola

(MOT)

without too much trouble, but Canton, Ohio will have a harder time replacing the 1,000 jobs that leave town when Hoover does.

What's more, residential real estate combines features of an investment with those of a consumer good. We all need a place to live anyway, so why not spend the money to get the place we want? But consumer goods don't appreciate in value, they depreciate, and even a house in a hot market needs ongoing maintenance to keep a sound roof, a safe electrical system and a working furnace.

Real estate agents want buyers to think of savoring a cup of coffee on the deck every weekend morning, not the cold mornings on the roof or the hard dollars and cents spent in order to make that house a sound investment. And no real estate agent ever owns up to the fact that some cities are simply better places to own a house than others.

A trade can't take place without both a buyer and a seller, and in some cities there are no buyers. For example, I've heard tell that middle managers in the auto industry are angling to get jobs with companies out of Detroit, figuring that a relocation package is the only way to get any cash for their houses. So this town, dependent on a struggling industry, now faces a brain drain fueled by falling property values.

So you may look to increase your human capital by following a compelling offer to a new home. But if that great transfer takes you to Detroit or Canton, or Lincoln or Morgantown, or other cities where real estate values don't keep pace with inflation, you have two choices: rent, or accept that your new house isn't likely to be a great investment.

Ann Logue is the author of "Hedge Funds for Dummies" (Wiley, 2006) and has written for Barron's, The New York Times, Newsweek Japan, and Compliance Week, among other publications. She is a lecturer in finance at the University of Illinois at Chicago. Her current career follows 12 years of experience as an investment analyst. She holds a B.A. from Northwestern University, an M.B.A. from the University of Chicago, and the Chartered Financial Analyst designation.