The Benefits of Growing-Equity in Your Home
Over the last few years, we’ve heard about rising home prices. Today, expert projections still forecast continued growth at a slower pace. One of the often-overlooked benefits of rising home prices is their positive impact on home equity. Let’s break down three ways this is a win for homeowners.
1. Home Equity Offers Move-Up Opportunity
With the rise in prices, homeowners naturally experience an increase in home equity. According to the Homeowner Equity Insights from CoreLogic,
“…homeowners with mortgages (roughly 62% of all properties) have seen their equity increase by a total of $1.5 trillion since the first quarter of 2023, a gain of 9.6% year over year.”
This increase in profit means that if homeowners decide to sell, they’ll be able to use their equity as they plan to move into their next home.
2. Gain in Seller’s Profit
Looking at the amount paid when they bought their homes and then the amount they received after selling, we can see that some homeowners were able to walk away with a significant gain.
Homeownership can be a form of ‘forced savings.’ Every month, when you pay your mortgage, you contribute to your net worth by increasing the equity in your home. And if values continue to rise, you benefit from growing the equity by doing nothing else!
3. Out of a Negative Equity Situation
Negative equity occurs when there is a decline in home value, an increase in mortgage debt, or both. Many families have experienced these challenges over the last decade. According to the same report from CoreLogic,
“In the first quarter of 2024, the total number of mortgaged residential properties with negative equity decreased by 2.1% from the fourth quarter of 2023, representing 1 million homes, or 1.8% of all mortgaged properties. On a year-over-year basis, negative equity declined by 16.1% from 1.2 million homes, or 2.1% of all mortgaged properties, from the first quarter of 2023.”
The good news is that many families have moved beyond a negative situation and no longer owe more on their mortgage than the value of their home.
“With home prices continuing to reach new highs, owners are also seeing their equity approach the historic peaks of 2023, close to a total of $305,000 per owner. Importantly, higher prices have also lifted some 190,000 homeowners out of negative equity,
Bottom Line
If you’re a current homeowner, you may have more equity than you realize. This asset can open the door to future opportunities, such as moving to your dream home. Let’s get together to discuss your options and start to put your equity to work for you.