… and why America’s current home equity reduces the likelihood of another housing meltdown
As a homeowner, one of the key advantages is the accumulation of equity over time. This equity can be utilized for purchasing your next home when you decide to sell. However, to make the most of it, it’s crucial to understand what equity is and how it increases. Bankrate has the following explanation:
“Home equity refers to the portion of your home that you have paid off, essentially your share in the property as opposed to the lender’s. In practical terms, home equity is the appraised value of your home minus any outstanding mortgage and loan balances.”
A Substantial Proportion of Americans Possess Significant Home Equity
If you have owned your home for some time, chances are you have amassed a considerable amount of equity – perhaps more than you realize. According to data from the U.S. Census Bureau and ATTOM, a large percentage of Americans currently have significant home equity:
- 38.7% of American homeowners own their homes free and clear
- 29.4% of American homeowners have mortgaged homes with more than 50% equity
- 31.9% of American homeowners have mortgaged homes with less than 50% equity
This means that 68.1% of American homeowners have more than 50% equity in their homes. That’s more than two-thirds! This extensive home equity provides multiple benefits to homeowners. Rick Sharga, Executive Vice President of Market Intelligence at ATTOM, elaborates:
“Record levels of home equity offer security for millions of families and reduce the likelihood of another housing market crash like the one witnessed in 2008.”
As time goes by, your home equity grows. This not only offers financial stability during your homeownership but also serves as a valuable resource when you decide to sell. The equity you’ve built can greatly contribute to the cost of your next home.
Think about your dream home. Are you picturing a beachside mansion? Whatever you’re picturing right now, somebody is living in that home. Do you think that home was their first home purchase? There’s a 99.9% chance that they purchased several homes prior. Why? Because they’ve been building equity in their prior homes, advancing their careers, and working towards landing in their dream home. Your current home could just be another stepping stone towards landing in your dream home.
Selling your home and tapping into your equity can make purchasing your next property easier. Partner with a trusted real estate advisor to determine your current home equity and start planning your next move.