Dream House or Nightmare?

Roger Elliott's neighbors call it the Dream House. It's a 3,500-square-foot, four-bedroom, three-bath home set on 2.3 acres in a gated equestrian community. Elliott, a contractor, and his wife Allison, a medical device saleswoman, built the house in Palm City, Fla., from plans they drew themselves.

All told, they've dropped about $750,000 on their home, which they've lived in for just over a year. In many ways they couldn't be happier. But as the housing market has shifted into reverse, the Elliotts--Roger in particular--are plagued by doubts.

This is the part of the story where you'd expect to hear that they financed the home with a risky subprime adjustable-rate mortgage they can't afford. Nope. The Elliotts have plenty of equity, and they aren't worried about making their mortgage payments.

Roger's problem is different. After living through the real-estate boom, he's grown to expect his home to provide more than simple shelter or a nice place to throw a dinner party. He wants it to provide a return on his and his wife's investment--preferably one that's measured in double digits.

Instead, the Elliotts' Dream House is losing value. Across the country it's a familiar scenario. Between 2000 and 2005 the median U.S. home price rose from $143,600 to $219,600--a rise of 52.9 percent, according to the National Association of Realtors. But economists reckon the housing market peaked in late 2005, and by the end of 2007, the Realtors' trade group predicts, home sales will fall by 10.8 percent from 2006. The median home price is also expected to make its first full-year fall since the Great Depression.

The Elliotts aren't sure what their home would sell for today. The local real-estate market is terrible, Roger says, with listed properties languishing. Roger guesses the house is worth 10 percent less than it cost to build--and he's worried its fall has just begun. "I have personal angst," Elliott says. "Yes, I built this fantastic house. My wife loves it. Everybody in the neighborhood thinks it's great." But it was a house built for appreciation. Now that prices are falling, he wishes he'd built something far more modest.