The Importance of Home Equity in Building Wealth
hello • January 11, 2021
The Importance of Home Equity in Building Wealth
Homeownership has always been the first rung on the ladder leading to household wealth. As Freddie Mac recently posted:
“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time.This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”
Home equity is the difference between the current market value of your house and the amount you currently owe on your mortgage. To estimate your equity, subtract your mortgage balance from the market
value of your home.
You can find what you owe on your mortgage by looking at your last monthly statement or by contacting your lender. If you need help determining the current market value of your home, contact a local real estate
professional.
Is homeownership truly a better path to wealth than renting?
Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are already baked into the rent payment – along with a profit margin. You don’t save money by renting.
As proof of this, First American broke down the net worth
of homeowners and renters by income categories. Here are their findings:
Only one income category ($127-192K) has a higher net worth for renters over homeowners. Every other category shows that being a homeowner leads to greater accumulated wealth.
According to the latest Homeowner Equity Insights Report from CoreLogic, the average homeowner gained $17,000 in equity in just the last year. Here’s a breakdown of the year-over-year equity gain by state:
When can you cash in on your housing wealth?
Your home equity is part of your total wealth as a homeowner. The two most common ways homeowners can leverage their wealth are:
- Selling
- Refinancing
Selling: When you decide to sell your home, the equity you’ve built over time will come back to you in the sale. For example, if you paid off your $200,000 mortgage and sold your home for $350,000, you would receive $150,000 after closing.
Refinancing: You can refinance your current mortgage and take out some of the equity you have accumulated. With today’s historically low mortgage rates, you may be able to take out substantial cash and keep your monthly payment the same. Thankfully, homeowners today are doing this responsibly and not repeating the same mistakes made in 2006-2008 when some cashed out their entire equity to purchase luxury items like new cars, lavish vacations, etc.
How can these options help homeowners?
During these difficult times, many households are struggling with their housing expenses. Homeowners, because of their equity, have better alternatives. Odeta Kushi, Deputy Chief Economist at First American, recently explained that homeowners financially impacted by the pandemic will not necessarily be faced with foreclosure:
“The foreclosure process is based on two steps. First, the homeowner suffers an adverse economic shock…leading to the homeowner becoming delinquent on their mortgage. However, delinquency by itself is not enough to send a mortgage into foreclosure. With enough equity, a homeowner has the option of selling their home, or tapping into their equity through a refinance, to help weather the economic shock.
”What might the future bring?
Most experts are calling for home prices to continue appreciating going forward. The Home Price Expectation Survey, a survey of a national panel of over one hundred economists, real estate experts, and investment & market strategists, indicates appreciation will continue for at least the next five years. Using their annual projections, the graph below shows the equity build-up a purchaser would potentially earn by
buying a $300,000 home this January:
Bottom Line
Home equity, for most Americans, is the quickest way to build household wealth. That wealth gives homeowners more options during good times and in difficult situations.
Here are the latest housing market statistics for 90034! If you'd like more detail on the market, what's available or how much your home might be worth, let's set up a meeting to discuss! #houseexpert #housingmarketexpert #house #home #listreports #localhousingdata #areaexpert #realestate #realestateagent #househunting #homeowner #hometrends #housingtrends
Text: After a 2nd Year of stubbornly high mortgage rates and weak transcaction volumes, it's hard to see the positives. Here's why you should stay hopeful. Read More
Happy 2025! Wishing everyone new year filled with joy and healthiness! It’s time for my annual Market Roundup which analyzes the sales activity for the entire Beverlywood area then drills down on Beverlywood Homeowners, Castle Heights (west of Robertson Bl. south of the HOA) and Reynier Village (east of Robertson west of La Cienega from Cadillac to Kramerwood Pl) using the boundaries outlined on the SORO website. Note : All data used for this analysis is supplied by Combined L.A./Westside MLS and is deemed accurate and reliable. It has not been independently verified and may not constitute all sales, just those reported in the MLS. Single family homes sales only.
This Red Day, KW will be honoring our Veterans. Your generous donation will help us provide a nutritious meal to 500 deserving men and women. These brave vets have served our country, and now it's our turn to serve them. Any amount of donation can make a big difference. Please use QR code to donate here . Thursday May 9th 11am-1pm Main parking lot at The VA Wilshire Federal Building 11000 Wilshire Blvd, Los Angeles, CA 90024
An area homeowner contacted me recently requesting advice on which paid service I recommend for identifying potential real estate fraud activity on their Beverlywood area single family residence.. My response was, “NONE! IT’S A SCAM. Your tax dollars enable you receive this important information for FREE.” Here is an explanation of how the service works. Below you will find a link to the website to register. The Los Angeles County Assessor’s e-Notification service gives homeowners the opportunity to register their e-mail to be alerted whenever a foreclosure, transfer of title, or mortgage is recorded on their property with the Los Angeles County Registrar-Recorder/County Clerk. This notification allows property owners a means to identify potential real estate fraud activity, such as a fraudulently recorded lien or deed. What is the Property Owner e-Notification Alert? Currently, the Registrar-Recorder will, within 30-days, mail a copy of a Grant Deed, Quit Claim Deed, Deed of Trust, or, within 5-days, mail a copy of a Notice of Default, or Notice of Sale to the property owner upon its recording. Now, homeowners can also opt-in for e-mail notifications. Once a homeowner registers, they will be sent an e-mail of any activity on their property within 48-hours. How does a homeowner enroll in the Property Owner e-Notification? To enroll in Property Owner e-Notification Alert, the homeowner simply creates a profile on the Los Angeles County Assessor’s portal website at https://assessor.lacounty.gov/news-information/enotification , click on Register Today, fill in the information, check the box for Opt-In for AIN/Recorded Document e-mail notification and click submit. Once they have created an account, log in to the portal and select “Property Owner e-Notification Alerts” on the landing page. Enter the AIN (Assessor Identification Number) on the “Property Owner e-Notification Registration” page and select “Add.” Once added, they will begin to receive electronic notifications when a document is recorded with their linked AIN. A homeowner may repeat this step to register any other LA County properties on their account. There is no limit and there are no fees. Why does the LA County Assessor offer E-Notification? The service allows property owners the opportunity to seek free, legitimate assistance and helps them avoid falling victim to real estate scams. Also, if a property owner suspects erroneous or fraudulent activity, they can report it to the Department of Consumer and Business Affairs at (800) 593-8222 , online at dcba.lacounty.gov , or by e-mail at homehelp@dcba.lacounty.gov . Dan May is among the leading real estate professionals in Los Angeles County. He can be reached at (310)739-8647 and dan@danmayrealestateteam.com Give Dan a call to confidentially discuss your options, your home’s value and/or for a list of local vendors.
Market Snapshot: 16 Single Family homes sold within the Beverlywood HOA and Adjacent boundaries (area 9 in the MLS) during the entire month of April 2024 compared to 15 in March and 9 in February. The 16 single family homes that sold in April were on the market for an average of 23 days and sold for an average of $1026.61 per sq. ft. of living space and 97.45% of the OLP (Original List Price). As of May 1st there are currently 22 Single Family homes for sale within the entire Beverlywood HOA and adjacent boundaries, down from 23 the prior month and 27 in February. The 22 single family homes currently For Sale have been on the market for an average of 59 days at a average price of $2,310,272 and $1122.87 per sq. ft. There are currently 15 Single Family homes “under contract” which means in escrow, likely closing soon. I study the market every day. Call Dan May today for local knowledge, flexible commission and proven results at (310)739-8647 .
Market Snapshot: 15 Single Family homes sold within the Beverlywood HOA and Adjacent boundaries (area 9 in the MLS) during the entire month of March 2024 compared to 9 in February, a 67% increase. The 15 single family homes that sold in March were on the market for an average of 36 days and sold for an average of $950.34 per sq. ft. of living space and 98.81% of the OLP (Original List Price). As of April 1st there are currently 23 Single Family homes for sale within the entire Beverlywood HOA and adjacent boundaries, down from 27 the prior month. The 23 single family homes currently For Sale have been on the market for a median of 39 days at a median price of $1,995,000 and $1024 per sq. ft. There are currently 21 Single Family homes “under contract” which means in escrow, likely closing soon. Analysis: With just 23 homes for sale and 15 sold last month alone, that calculates to less than 2 months supply of homes. Fewer than 6 months supply is considered a SELLER’s market. The unofficial start of the Residential Selling Season is the day after the April 15th Income Tax Deadline, April 16th. Contact area specialist Dan May today for a confidential, no obligation consultation at (310)739-8647 , you will be glad you did!
