Home prices have have been increasing steadily over the last year. Home equity and appreciation are directly linked – as a home’s value increases, so does the homeowner’s equity. With recent gains, homeowners are seeing their financial well-being grow to record levels.
Other great news for homeowners: as seem in the most recent Home Price Expectations Survey – a survey of over a hundred real estate experts, economists, and market and investment strategists – forecasts see home prices continuing to appreciating over the next five years, adding to the record amount of equity homeowners have seen over the past year. Below are expected YOY growth in home price appreciation from the report:
What Does This Mean for Homeowners?
Home prices are climbing today, and the data in the survey indicates they’ll continue to increase, but at rates that approach a more normal pace. Even still, the amount of household wealth a homeowner stands to earn going forward is substantial. This truly becomes clear when we consider a scenario using a median-priced home purchased in January of 2021 and the projected rate of appreciation on that home over the next five years. As the graph below illustrates, a homeowner could increase their net worth by a significant amount – over $93,000 dollars by 2026.
Home Price Appreciation and Home Equity
CoreLogic recently released their quarterly Homeowner Equity Insights Report, which tracks the year-over-year increases in equity. It shows an average annual gain of $33,400 per borrower over the past 12 months. In the report, Dr. Frank Nothaft, Chief Economist for CoreLogic, further explains:
“Double-digit home price growth in the past year has bolstered home equity to a record amount. The national CoreLogic Home Price Index recorded an 11.4% rise in the year through March 2021, leading to a $216,000 increase in the average amount of equity held by homeowners with a mortgage.”
The expected, continued growth of prices means homeowners will continue to build on the past record levels of home equity – and overall financial prosperity. This presents today’s homeowners with an interesting and unique opportunity: using this growing equity for a home updates. With few homes on the market and strong buyer demand, there might not be a better time to sell your current house and move into one that better meets your needs.
Prices of homes are looking to continue appreciating over the next years, and coupled with the equity gains are one of the quickest ways homeowners can build wealth.