The Dramatic Return Of Homeowner Equity

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Equity refers to the value of a property minus the amount still owed on the mortgage. In other words, it’s a reflection of how much of your house’s worth is actually yours. As a homeowner, your equity increases each month as you pay your monthly mortgage payment. It also goes up if your home’s value rises. Similarly, when home prices fall, so does a homeowner’s equity. For example, homeowner equity hit it’s peak of $13.1 trillion in 2005, according to the Federal Reserve. House prices were up and buying a home was considered a good way of increasing one’s net worth. However, by 2011, the financial crisis had hit and took home prices down with it. That year, homeowner equity fell to $6.4 trillion. The housing market’s worth had been cut nearly in half and million of homeowners found themselves in a much different situation and, in some cases, owing more on their mortgage than their house was worth. But, despite the dramatic crash, the housing market in the years between then and now has regained much of its previous value. In fact, according to a report from RealtyTrac, homeowner equity has increased $4.9 trillion since 2011, bringing it to a total of $11.3 trillion. That means, over the past three years, homeowners have experienced a dramatic turnaround and, in the process, regained much of their homes’ lost value. That’s great news for current homeowners but also prospective buyers who hope to find a house that will be both their home and a good investment. More here.

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