We may be in the middle of a pandemic, but home equity is soaring. According to CoreLogic, in the 2nd quarter, home equity for homeowners rose 6.6% annually. That equals a gain of $620 billion dollars across the country! Or, about $9,800 per home. So why is this happening? And if you’re a homeowner, what does this mean for you?
Why is Home Equity Rising?
First things first: home equity is the value of a homeowner’s interest in their home. It is the current value of the home minus any liens or mortgage debt. In other words, it is the amount of home the owner actually possesses at any time. Because equity depends on the market, it can fluctuate at any time.
This leads us to why home equity is rising. There is a current shortage of homes but high demand thanks to historically low-interest rates. This is driving home prices (and equity) up.
Pro Tip: Here’s how to quickly calculate your home equity. Subtract your mortgage balance from your home’s total value. Then divide that number by the value.
A Word of Caution
When home equity rises, it’s tempting to want to borrow against your home. However, if the last recession taught us anything – this can be risky! There is no promise that home values will stay high. In fact, it’s possible that home prices will drop over the next twelve months thanks to mortgage delinquencies. Plus, political uncertainty and the ongoing pandemic means certainty is a hard thing to come by right now.
What Does this Mean for You as a Homeowner?
Put simply, if you’ve been considering selling, now is a great time to do it! We are in a seller’s market so it’s possible your home could command a price higher than you would think. If you’d like to upgrade to a newer, or larger home, you have a great opportunity right now.
Click here to see the average amount of equity each state gained in 2020.
Want to Chat?
If you’re curious about your home equity and want to chat about your individual situation, we’d love to talk. The Shannon Jones Team is here to answer any of your questions you have about your home’s value or about selling your home. Please fill out the form to get started. Or, to get in touch with us immediately, give us a call at 562.896.2456.
In the meantime, here are some other helpful articles you may be interested in:
- Selling a Home in the Fall
- Is Now the Right Time to Sell?
- How Home Value is Calculated
- Safely Sell Your Home During COVID-19
- What to Update if You Plan on Selling Your Home