The Surprising Growth of Home Equity: What It Means for Homeowners

If you own a home, your net worth has probably experienced a significant boost over the past year. Home prices have been on the rise, leading to faster-than-expected equity building. But what exactly is equity, and how has it changed recently?

Understanding Equity

Equity is the current market value of your home minus what you owe on your mortgage. As home prices increase, so does the equity you have in your property. Over the past year, the housing market has seen more buyers than available homes, driving prices—and consequently, homeowner equity—up.

A Look at the Numbers

According to the latest Homeowner Equity Insights from CoreLogic, the average homeowner's equity has surged by $28,000 in just the past year. This is a national average, and the actual increase can vary by state. Here in California, the average is $64,000 in the last year.

Equity Gains: Pre-Pandemic Purchases

If you bought your home before the pandemic, the news is even better. Data from Realtor.com reveals that home prices have skyrocketed by 37.5% from May 2019 to May 2024. This substantial increase in home value means significant equity growth for homeowners. Ralph McLaughlin, Senior Economist at Realtor.com, highlights the extraordinary gains in home equity over the past five years.

Selma Hepp, Chief Economist at CoreLogic, provides further context, noting that the total equity for a typical homeowner today is nearing the historic peaks of 2023, with an average of close to $305,000 per owner.

The Benefits of Rising Home Equity

The significant equity increase offers homeowners various opportunities:

- Start a Business: Use your home equity to fund your entrepreneurial dreams.
- Education Funding: Tap into your equity to pay for educational expenses.
- Purchasing Your Next Home: The equity from selling your current home can provide a substantial down payment for your next property.

When you sell your home, the equity you’ve built up comes back to you, potentially covering a significant portion of your next home’s down payment or other financial goals.

If you're considering a move, the equity you've accumulated can be a powerful financial tool. Curious about how much equity you have and how it can assist in purchasing your next home? Connect with Melody to explore your options and make the most of your home’s value.