Building financial wealth and stability remains one of the top reasons Americans choose to own a home, and as a homeowner, your wealth often grows without you even realizing it. In a recent paper published by the Urban Institute, Home Ownership is Affordable Housing, author Mike Loftin illustrates how homeowners increase their equity and their wealth simply by making monthly mortgage payments:
“The principal portion that reduces the loan balance builds the homeowner’s equity. In doing so, the principal payments behave like an automatic savings account. The principal payment is not money going out; it is money staying in.”
But home equity – the difference between the value of your home and what you currently owe – isn’t just built through your monthly principal payments. Home price appreciation plays a vital role in growing your equity and, ultimately, your wealth.
As Freddie Mac explains:
“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”
Homeowners Continue To See Equity Increase
CoreLogic recently published their latest Homeowner Equity Insights Report, and it shows continued growth in equity amidst record home price appreciation. The report provides several key takeaways, all of which point to rising wealth for homeowners:
- The average equity gain of mortgaged homes during the past year was $33,400
- The current average equity of mortgaged homes is greater than $216,000
- There was a 6% increase in total homeowner equity over the past year
- Total U.S. homeowner equity has reached nearly $1.9 trillion
Equity Provides Homeowners with Flexibility
In addition to being a critical tool in building wealth, a homeowner’s equity also provides significant flexibility. When you sell your house, the accumulated equity comes back to you in the sale. Recent increases in home equity coupled with record-low mortgage rates mean it could be the perfect time for homeowners looking to make a move.
Mark Fleming, Chief Economist at First American, notes:
“Existing homeowners today are sitting on record amounts of equity. As homeowners gain equity in their homes, the temptation grows to list their current home for sale and use the equity to purchase a larger or more attractive home.”
Increasing equity also helps families facing challenges brought on by the pandemic. Frank Martell, President and CEO of CoreLogic, explains in the recent Homeowner Equity Insights Report:
“Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic. These gains have become an important financial tool and boosted consumer confidence in the U.S. housing market, especially for older homeowners and baby boomers who’ve experienced years of price appreciation.”
Home equity has always been a powerful wealth-building tool, and homeowners continue to see their financial stability increase. Let’s connect today so you can better understand how much equity you have in your current home or if you’re ready to take the next step in building your savings as a homeowner.
Starting Your Home Search Is Easy
Starting the home buying process is easy and involves a few simple steps: Download my Home Buyers Guide to learn general information. Search for homes currently on the market to get a feel for the types of homes, locations, and price points available. And of course, please call me, or send me an email / text, to discuss any thoughts about your next home, the buying process, and the most important next step. When in doubt, just call me and I will help you with each step of your journey.
Is Time To Sell Your Home?
Find out how much your home is worth and download my free guide for home sellers for helpful information. It is important to choose a REALTOR® who can develop an effective marketing strategy for your property, negotiate well on your behalf, and has the knowledge to provide an accurate market comparison so you can determine the right asking price. The market changes each week and your asking price is an important component of your selling strategy. I am here to listen and serve, let me know if you want to know how your home stacks up against the competition, or how we can position your property to sell quickly and for a good price, or if you have unique circumstances or goals. Contact me today to start a discussion…
My Denver real estate blog has loads of useful information for home buyers trying to figure out what they want to do…
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