Experts continue to confirm what we’ve been saying for years: Homeownership has been the main path to wealth for most Americans over the past several decades. Today, home equity – the market value of a home minus the balance on any home loans – represents more than four-fifths of the typical family’s wealth according to the America Saves Advisory Committee. Each home loan payment not only helps pay down the principal and interest on your home, but also builds your wealth.
The latest CoreLogic Equity Report noted that over a million borrowers regained equity in 2015 and that if homes prices continue to rise gradually in 2016 that trend will continue. They also noted that:
- 95% of homes valued over $200,000 now have equity
- 87% of homes under $200,000 have equity
- The 11.5% growth in home equity in the 4th Quarter of 2016 market the 13th consecutive quarter of double-digit growth
How does homeownership build homeowner wealth? As noted above, simply by paying off your home loan you are building wealth. And, you are doing this each month in a regular and disciplined way. Second, it is highly likely, though absolutely not certain, that the market value of your home will increase over time. Nationally, for several decades, home values have increased, on average, around 4% annually, though keep in mind they can go down as well as up.
One thing we’ve found surprising, even given the national recovery in home prices since the mortgage fallout, is how much of the U.S. has significant equity – meaning equity of at least 20%. 72.6% of homes nationally now have significant equity and we’re thrilled about these numbers!
Finally, here are 5 Strategies for Building and Preserving Home Equity, and feel free to reach out to us to discuss any of these:
- Prepare yourself for homeownership financially
- Purchase a home
- Make home loan payments on time
- If you have difficulty making payments, seek help
- Be cautious in borrowing home equity