As home values have risen, so has owner equity. For most homeowners, the equity in a property is one of the foundations of building long term wealth, and a major reason Americans seek to own vs. rent. At a time when price appreciation continues to climb, those who own are seeing big equity gains, and those who don’t own yet are motivated to buy and join in reaping the rewards of the market.
Individual owner equity has grown 13.3 % year over year, the highest rate in the last four years. The average homeowner gained $16,300 in equity from the first quarter of 2017 to the first quarter of 2018. And overall owner equity as a percentage of the total national value of all real estate has hit a record high.
While this might worry some, who continue to call the current growth another “bubble”, the fundamentals underlying the numbers are far more positive. With the market crash in 2008, the growth of mortgage debt fell negative, and stayed that way until 2015. Since then, total debt has only risen modestly, while property values have gone up faster. Total equity (the difference between that debt and value) has reached $15 trillion in the first quarter of this year. As a percentage of value, owner equity nationwide has increased to 59.7% this year, from the past high of 58.9% at the end of last year.
Another strong fundamental accompanying equity gains is the fact that a higher percentage of the new mortgages being issued are going to those buyers with the best credit. Since the crash, the share of loans going to households with scores over 759 climbed sharply from 24% in 2007, to 58% this year. So with homeowners sitting on more equity, and holding solid loans, the likelihood of any repeat of the dark days seems slim to none. Instead, homeowners are finally taking advantage of one of the key benefits of owning a home.
Have you built sizable equity and are looking to cash in? First time buyer looking to start your road to building your nest egg? Either way, we can help you. Contact us today for all your real estate needs!