Homeowners Rejoice With Rising Equity
For the past year, the real estate market has been scorching hot. Demand for buying a new home has been sky high as mortgage rates dropped to historic lows. At the same time, housing inventory has also reached historic lows, restricting the number of homes available to buy. This is especially true in markets like Massachusetts. High demand and low supply has caused home prices to rise across the United States, even in struggling markets. If you are someone who purchased a home before last year or early in the market’s rise, you are doing great. Chances are, the value of your home has risen dramatically. In that case, it is also likely that your equity has risen, too. That is great news for homeowners and the team at Peoples Choice Mortgage is here to breakdown why homeowners are rejoicing.
What is Equity?
People incorrectly think of taking out a mortgage to buy a home as going into debt. While it is true that you are getting a sum of money that you have to pay back, it is not entirely debt. As you pay down the principal on your loan, you will reach a point where your home value is more than the amount you still owe. This difference is equity and equity is an asset. Growing the equity in your home is one of the quickest ways to build true wealth for you and your family.
Why is Equity Increasing for Homeowners?
One of the huge benefits of homeownership in today’s market is that home equity has been growing. The reason for this is that home prices and values have been increasing as demand stays high and supply stays low. The chart next to this section shows the amount home values have appreciated over the past few years. According to CoreLogic, home values increased by 6.4% in 2017. In 2018 it increased by 4.8%. It then increased by 4.7% in 2019. In 2020, home values skyrocketed by 9.2%.
The increase in the appreciation of home values has helped leave homeowners flush with home equity. Not only can you build equity by paying down your principal, but you can also build it as your home value increases. This is true because it is the difference in the amount you and how much your home is worth. The numbers for homeowners in 2020 are staggering. According to data from CoreLogic, the average homeowner in 2020 saw their home equity increase by $23,600. Keep in mind that this is an average of every homeowner in every market. Some markets have fared even better. Massachusetts saw an average increase of $36,000. Colorado saw equity increase by $32,000. Basically, the average homeowner in the United States saw their wealth increase by over $23,000 in 2020 just because they owned a home.
Is it Too Late to Buy a Home and Take Advantage of Today’s Market?
At this point, it is abundantly clear that buying a home in a hot housing market is good. When you buy a house and its value increases, this gives you an opportunity to get equity. The big question then is if it is too late to take advantage of today’s real estate market? Will buying a house now give you a chance at building equity and building true wealth? Fortunately, we do not think it is too late to reap the benefits of owning a home in today’s market. There is a good chance that buying a home now will still let you take advantage of rising housing prices.
The reason why it is not too late to ride this market to the top is that real estate is still poised for tremendous growth. According to CoreLogic, the real estate market will slow down this year, but home prices should increase by about 3.3% headed into January 2022. It is important to keep in mind that this is just one estimate and this estimate is based on national averages. This is important because not all markets are created equal. Experts predict that places like Boston are going to see housing prices increase closer to 6%. If your home value is increasing as you pay down your mortgage, then you are on your way to building equity.
Final Thoughts
If you owned a home since the beginning of 2020, then you have probably seen your equity and wealth increase. The great news is that it is not too late to get in on the fun. However, every moment you delay, you risk missing out on a great opportunity to build wealth for yourself and future generations. If you think that you would like to buy a home, then do not wait and contact us now! The team at Peoples Choice Mortgage will give you a complimentary, no-obligation mortgage qualifier to see how close you are to being a homeowner. It is important to keep in mind that even if you do not qualify today, there are things you can do to change that for the future. However, if you do not take the first step of seeing where you stand right now, you’ll never know if owning the home of your dreams is within reach.
