Real Estate

Home Equity: What It Is and Why It Matters
Home Equity: What It Is and Why It Matters 150 150 nathanburch
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It is often said that homeownership builds wealth. So, what is home equity, and how can it enhance your net worth?

What is home equity?

Home equity is the current market value of your home, minus what you owe. You’re looking for a positive number. Any gain comes from:

  • Paying down the principal balance on your loan.
  • An increase in market value over time.

How does home equity work?

Building home equity is a bit like investing in a long-term instrument, like bonds. There are some ways to tap it, but wealth is created over years as your share of “free and clear” ownership of the house increases.

As a rule, building home equity is a slow climb, at best. U.S. residential year-over-year home price appreciation averaged 1.89% from 1997 to 2017, adjusted for inflation, according to CoreLogic, the Bureau of Labor Statistics, and the Urban Institute.

However, behind that average are some major year-over-year price swings during the same period, ranging from a gain of 12.6% to a drop of 18.1%, according to the Urban Institute.

When it comes to short-term home appreciation, sometimes it’s more of a bungee jump than a climb.

Why is home equity important?

Home equity can be a long-term strategy for building wealth. Mortgage payments reduce what you owe while your home gains value, so paying on a house has been called “a forced savings account.”

Home equity can be a long-term strategy for building wealth.

This is unlike virtually every other asset purchased with a loan, such as vehicles, which lose value while you pay them off.

A growing number of U.S. homeowners are amassing “impressive stockpiles” of home equity wealth, according to Daren Blomquist, senior vice president at Attom Data Solutions. At the end of the second quarter of 2017, over 14 million U.S. properties were considered “equity rich” — meaning the debt on the property was 50% or less of the home’s current market value. That’s about 24% of all owner-occupied homes with a mortgage.

Building home equity is definitely a long-term proposition. Blomquist says wise words from one of his relatives may state it best. “My wife’s great-grandfather — who bought property in Southern California a long time ago — his advice was, ‘You take care of a piece of real estate for 20 years, it’ll take care of you forever.’”

Source: Nerd Wallet

5 Reasons to Buy a Home This Fall
5 Reasons to Buy a Home This Fall 1024 683 jaycurley

Reasons to Buy a Home This Fall

Real estate markets ebb and flow just like the seasons. The spring market starts hopping when the sun comes out, flowers bloom and winter is over. Conversely, fall signals the beginning of a slower market, which could be good for buyers.

If you’re in the market for a home, here are some reasons why fall can be a great time to buy.

Leftover spring inventory may result in deals

Home sellers tend to go on the market for the first time in the spring. They often list their homes too high out of the gate, which could mean that a series of price reductions follow during the spring and the summer months.

These sellers have fewer chances to capture buyers after Labor Day. By October, buyers are likely to find desperate sellers and prices that may, in fact, be below a home’s true market value.

Fewer buyers are competing

Families who want to be in a new home by the beginning of the school season are no longer shopping at this point. These families have exited the market, which means less competition. That translates into more opportunities for buyers.

Taking out an entire segment of the housing market provides millennial, single, and baby boomer buyers some breathing room. You’ll likely notice fewer buyers at open houses, which could signal a great opportunity to make an offer.

Motivated sellers want to close by the end of the year

While a home is where an owner lives and makes memories, it is also an investment — and one with tax consequences. A home seller may want to take advantage of a gain or loss during this tax year.

Buyers might find homeowners looking to make deals so they can close before December 31st and get that tax benefit. Ask why the seller is selling, and look for listings that offer incentives to close before the end of the year.

Homes for sale near the holidays signal a motivated seller

As the holidays approach, the last thing a homeowner wants is for their sale to be dragging on and interrupting their parties and events.

If a home has not sold by November, and it’s still sitting on the market, that homeowner is likely motivated to be done with the disruptions caused by their home being listed for sale.

Many homes don’t show as well once the landscaping fades

The best time to do a property inspection is in the rain and snow, because the home will be truly exposed for buyers. The same holds true for fall, when flowers die, trees start to shed their leaves, and beautiful landscapes are no longer so lovely.

Scratching the surface of the pretty spring home season and fall reveals home flaws, making it a great time to see each home’s true colors. It’s better to see the home’s flaws before making the offer, instead of being surprised months after you close.

Source: Zillow

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