Are you aware What’s Your Home Equity?
Let’s understand how it works….
To calculate your home’s equity, divide your current mortgage balance by your home’s estimated current market value. For example, if your current balance is $100,000 and your home’s market value is $400,000, you have 25 percent equity in the home. If the mortgage balance is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the mortgage balance, then the property is determined to be in a positive equity position.
While property values can go up or down, the national average for home appreciation is 3% per year.
Let’s see the current Home Equity Trend:
Selma Hepp, Chief Economist for CoreLogic has stated that:
“Home equity trends closely follow home price changes. As a result, while the average amount of equity declined from a year ago, it increased from the fourth quarter of 2022, as monthly home prices growth accelerated in early 2023.
The average U.S. homeowner now has more than $274,000 in equity — up significantly from $182,000 before the pandemic. Also, while homeowners in some areas of the country who bought a property last spring have no equity as a result of price losses, forecasted home price appreciation over the next year should help many borrowers regain some of that lost equity.”
Home Equity Prices look promising:
Since home equity is affected by home price change, borrowers with equity positions near (+/- 5%), the negative equity cutoff, are most likely to move out of or into negative equity as prices changes, respectively.
However, owing to the disparity between current home inventory for sale and the number of homebuyers in the market over the past few years, home prices appreciated substantially because of higher demands and lesser supplies.
Though price appreciation has slowed this year, that doesn’t mean homeowners have lost all the equity in their home. In fact, years of rapid appreciation in most places have been keeping homeowners in good standing . Home equity remains solid despite decelerating home prices. The latest Homeowner Equity Insights report from CoreLogic finds the average homeowner’s equity has grown by $34,300 over the past year alone.
And if you’ve been in your home for a longer time, chances are you have even more equity than you realize.
Why Is this Important to Know
While equity helps increase your overall net worth, it can also help you achieve your dream of buying your next home. You can set off a larger down payment for the next house by selling your current home.
So, if you’ve been holding off on selling, it may be time to find out how much equity you have and how it can help fuel your next move. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, connect with a local real estate professional.