Selling costs. Thin equity gets eaten by the cost of selling, even when the price barely moves. Two examples show how: - Buy with 3.5% down on an FHA loan and you start with a sliver of equity. If you must sell soon after, commissions and other selling costs, roughly 5% to 8% of the price (and commissions are negotiable), can exceed that sliver. You would bring cash to the closing just to get out, even though the home never lost a dollar of value. - Buy with 10% down into a market that genuinely drops, the way 2008 played out, and the price decline plus selling costs together put you below what you owe. None of this bites unless you are forced to sell. Hold the home and keep making the payment, and a paper dip stays on paper. Home values have historically recovered over the long run, though nobody can promise the timing. The protection is the same as it always is: buy a payment you can sustain and a home you plan to stay in, and short-term selling-cost math stops being a threat.