If you haven’t yet purchased a home, but have heard all this talk about it being a good idea because of “home equity,” stick around. We’ll break it down for you. Equity is the difference between what you owe on your mortgage and what your home is currently worth. Currently: key word. This means the equity in your home can change all the time, and why, during a seller’s market, you’ll gain the most equity.
This is what is happening in today’s market (and has been happening for the past couple years). You’ve heard us talk about low inventory many times now. Because of the low inventory, that puts people selling their home at an advantage, hence the term, seller’s market. Because of the high competition, they’re able to list their homes for more money than if home inventory were at a normal amount. In addition, multiple offers and bidding wars are driving the price up.
As a seller in a seller’s market, you hold the power. It’s like everyone wants to come to your birthday party and you’re the most popular person in school again (or for the first time). You have all these people literally showing up on your doorstep to see your house and offer you lots of money to buy it.
When this happens, it’s clearly exciting for lots of reasons, but the one we want to highlight is what it will do for your home equity.
CoreLogic tells us that in the last year and a half, the average home equity gained has been around $57,000. That’s the average! Which means, some people are really raking in the dough for their homes.
One of our clients sold their home last May. It was the second home they’d owned, but they had only been in the home a year. They were able to sell it for $57,500 more than they purchased the home for, again, just one year prior. In addition, they already had $30,000 of their own money in the home, so after commissions were taken out, they walked about with $71,000 in equity to put into their next home.
A Wake-up Call for Renters
You’ve heard people say that renting is just throwing your money away each month, and now you know why. For example, the client mentioned above lived in a brand new build in Liberty, MO, and their mortgage each month was around $1,500. Some of you are paying that or even more to live in a place that you don’t own.
When you own a home, at least you know that painful mortgage payment each month goes to paying down your loan and eventually making you more money once you sell your house – home equity.
We understand that some renters’ hesitation is the fact they don’t have a lot of money for a downpayment. Although this certainly helps with jump starting your home equity and keeping your monthly mortgage payment down, there are options if you don’t have your nest egg fund started. Here are some tips about loans and down payments to help you better understand some of your options.
If this blog is the message you’ve needed to take that leap into home ownership and building equity, the Dani Beyer Real Estate team is ready to help you through each step of the journey. OR, if you’ve owned a home for quite some time and you’re ready to take advantage of building your equity through this sellers’ market, please reach out to us about setting up a free listing consultation! You can also take advantage of our free home estimator tool to see what your home is worth.