Though most people don't realize it, there's actually a greater risk of losing money during a declining housing market than from all the risks of fire and natural disasters combined. Surprised? That's because it's much easier to imagine the emotional and financial devastation a fire would bring. But this same magnitude of loss can result if you need to sell your home in a depressed housing market.

Let's say you buy a home with 10 percent down and a mortgage to finance the remaining 90 percent. This is called 'leveraging your money' -- an age-old formula that has enabled millions of Americans to afford the home of their dreams without having to save enough money to buy it outright. However, in a down market this 10/90 leverage can put you at significant risk. That's because the amount you put down is small compared to the amount the bank lends you - in this case a 10 to 1 ratio. This greatly magnifies your equity's exposure to price fluctuation, hence the risk.

You owe the bank no matter how the price of your home changes, so your equity bears all of the price volatility risk of your home. When prices go up, everybody's happy. But when prices go down, you could lose your entire investment.

To determine how much money you could lose in a declining housing market, try our interactive Risk Calculator.