We understand fears of another housing crash are making many people wait to purchase a home. However, there’s one factor that most people don’t consider when analyzing the state of the US housing market…and that’s homeowner equity.
Homeowner equity is going up…and it’s going up FAST. That’s according to CoreLogic’s new Homeowner Equity Insight report, which gives us some incredible insights as to what is happening with homeowner equity across the United States.
Below are the main takeaways from CoreLogic’s report that shed some light on just how much home equity there currently is, and how it will help prevent another housing crash.
According to the report, the average equity in mortgaged homes (homes that currently have mortgages on them) has increased by an average of $33,400 per home over the past year.
This tells us that people with loans on their homes are saving their equity. Before the mortgage meltdown in 2008, homeowners were using their homes as “ATM machines”. As their home values would go up, they would immediately cash out the equity to fund vacations, toys, and other depreciating assets.
That was very different to what we’re seeing today. Homeowners are now being smarter about their home equity and leaving it alone to grow – and it’s growing rapidly.
The other important number to look at is the total equity of mortgaged homes. Currently, the total amount of equity in mortgaged homes across the country is $1.9 trillion. This breaks down to an average of $216,000 of equity per mortgaged home in the United States.
This is an important statistic to consider if you are worried about another housing crash. One of the big challenges during the mortgage crisis of 2008 was that homes were over-leveraged and there was very little equity available. When the recession came and home prices started to fall drastically, it was a devastating domino effect. Your neighbor was forced to sell their house at a loss, and then you had to sell just as low or lower to compete with them, and on and on it went until home values bottomed out.
But when you have $216,000 in equity in your home, prices can come down quite a bit and you can still sell, get out of the home, and you don’t have to go into any kind of bank foreclosure or short sale.
It’s clear that being a homeowner is very lucrative right now. Home equity is at the highest it’s ever been, and it is continuing to increase at rates we have never seen before. This is allaying fears of another housing crash, as homeowners are less likely to be upside down in their homes should prices drop steeply (which, as we’ve mentioned before, is very unlikely).
If you would like to buy a home, but feel like you are locked into your current home and accessing your equity to fund a move would be too difficult, fill out the form below to request a meeting and learn about NEO Home Loans’ Bulletproof Buyer Program. This new program allows you to buy the home that you want to purchase in cash BEFORE you sell your current home. This means you would have the ability to not only compete with all-cash offers, but also move up into your new home before having to access your current home equity.