When you think of homeownership, whats the first thing that comes to mind? Chances are you might focus on the non-financial benefits, like the security or stability a home provides. But what about equity? While it can be overlooked, a homeowners equity helps build long-term wealth over time. Heres a look at what equity is and why it matters.
For a homeowner, your equity is the current value of your home minus what you owe on the loan. So, ashomevalues climb, your equity does too.Thats exactly whats happening today.There arent enough homes on the market to meet buyer demand, so bidding wars and multiple offers are drivingprices up. Thats because people are willing to pay more to buy a home. Right now, this low supply and high demand are giving current homeowners a significant equity boost.
Dr. Frank Nothaft, Chief Economist at CoreLogic, explains it like this:
Home price growth is the principal driver of home equity creation. The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.
To find out just how much rising home values have impacted equity, we turn to the latest Homeowner Equity Insights from CoreLogic. According to that report, the average homeowners equity has grown by $56,700 over the last 12 months.
Curious how your state stacks up? Check out the map below to find out the average equity gain for your area.
How Rising Equity Impacts You
If youre already a homeowner, equity not only builds your wealth, it also opens doors for you to achieve your goals. It works like this: when you sell your house, the equity you built up comes back to you in the sale. You can use those proceeds to fuel your next move, especially if youve decided your needs have changed and youre looking for something new.
If youre thinking about becoming a homeowner, understanding the importance of equity can help you realize why homeownership is a worthwhile goal. It builds your wealth and gives you peace of mind that your investment is a wise one, not just from a lifestyle perspective, but from a financial one too.
Bottom Line
Whether youre a current homeowner or youre ready to become one, its important to know how equity works and why it matters. If this inspires you to make a move, lets connect to explore your options and find out what steps you need to take next.
