Homeowner Equity Is Up
On a National level, Homeowner Equity grew in the fourth quarter of 2020 by $1.5 Trillion. Up 16% from 2019 according to CoreLogic a property insights firm.
At the same time, Homeowners with negative equity, (mortgage debt which is more than the value of the home), decreased by 21%.
Homeowner Equity, defined as the value of the home less the mortgage owed. Appreciation is the dynamic that is moving homeowner’s equity to the positive position.
Annual price growth has been running about 6.4% for the past 10 years, but according to the National Association of REALTORS®, annual price growth in the last five years has grown at 7.3%. Home prices in December 2020 were up 9.2% from the year before.
The average homeowner with a mortgage, has more than $200,000 Homeowner Equity, according to Frank Nothaft, Chief Economist for CoreLogic.
Homeowner Equity is a significant component of net worth. In a 2019 Survey of Consumer Finances by First American, housing wealth was the single biggest contributor to the increase in net worth and wealth building across all income groups.
The study also concluded that housing wealth represented nearly 75% of total assets of the lowest income households. For homeowners in the mid-range of income, it represented 50-65% of total assets and 34% of total assets for the highest income households.
The coronavirus pandemic ravaged the overall economy, but homeowners have enjoyed a bump in their Homeowner Equity through price appreciation.
Low Interest Rates Fueling Demand
Low mortgage rates have driven demand for a low supply of houses, sending prices soaring throughout the summer and fall.
“The housing market has remained a strong pillar in an otherwise tumultuous economic year,” said Frank Martell, president and CEO of CoreLogic.
“A sharp rise in demand, spurred by record-low interest rates, continues to bolster homeowner equity. And with many people now spending more time than ever before at home, some homeowners have tapped into their strengthening Homeowner Equity to fund renovations.”
Time to Make a Move?
After spending so much time at home, others are thinking about using some of their Homeowner Equity to make a move. Trading their smaller home close to the city for something outside large metropolitan areas. The new work and learn from home trend has introduced a new genre of homes that include dedicated space for both home office and a flex room that can be used as a classroom for a small group.
Coachella Valley – The New Place to Call Home
Not just for the Retired anymore! The Coachella Valley has seen an increase in Home Buyer interest as a result of this new trend. Younger, still working Home Buyer’s are using their Homeowner Equity and buying homes in the CA Desert. They’ve discovered the Desert has a great lifestyle with lots of things to do other than golf. And Coachella Valley home prices are still affordable compared to surrounding metropolitan areas like Los Angeles, Orange County or San Diego.
Find out what areas are most popular with the new home buyer. Give us a ring, we’re here to match you with your perfect Desert Lifestyle Home. Shoot us an Email
Cathi Walter is a Broker Associate with Bennion Deville Homes, located in Palm Desert, CA.