Your home: How much equity do you have in your home?

Well, the books are closed for 2013 and the projected numbers look really good when it comes to homeowners reclaiming some equity. NAR Research is forecasting that home values will finish 11.3 percent stronger than the previous year. Those are great numbers! As 2014 continues on a similar trend, home equity should be back in positive territory for most homeowners. Even for those who purchased in 2006 and 2007.

Going in to 2013, most homeowners who purchased in 2006 and 2007 were in a negative equity position. That is, unless they had made a sizable down payment when they purchased. Negative equity has been something that the real estate market has just had to get used to coming out of the real estate crash. However, there is a counter-intuitive side to it. In a healthy market, time equals equity. The longer you own a home, the more equity you build up through a combination of paying off your principal balance and the appreciation of home values.

This is not the case coming out of a housing crash. For example, a homeowner who purchased in 2010 will (on average) be in a better equity position than someone who purchased in 2006. In this case, three years of ownership will prove to bring more equity than seven. Pretty funky, huh?

My hope for 2014 is that through continued improvement in home values, these 2006 and 2007 buyers will not only be back into a positive equity position but they will also enter the market. I personally have clients that will be selling this year due to the improvement in values that we saw in 2013. And trust me… we need the inventory. Just ask any buyer out there actively looking for a home. There is not a lot to choose from. These new sellers will also create a new wave of buyers when their current home sells. And the wave begins!

One thing to keep in mind, and I think that it is a big one: For most homeowners (and investors), real estate is still one of the best ways to earn money through equity improvement and to eventually grow long-term wealth.

Hello potential buyers! If equity growth is important to you, get in the market now. As values continue to improve, you are missing out on equity each and every day. The old adage of “buy low and sell high” certainly holds true in real estate. Just look at the chart below.

Compare the equity position of those who purchased at the peak of the market (2006) to those who purchased after the crash (2010-2012). Affordability is still very high. Don’t hesitate and allow the rising interest rates and increasing home values to take away your fair share of the market.

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