Despite the pandemic’s weighty impact, it did little to slow down the ability for homeowners to earn wealth this year.
In the third quarter of 2020, homeowner equity rose to its highest level in six years. According to CoreLogic, a majority of homeowners saw their home equity increase by more than 10% year over year.
For practical purposes, the new increase to home equity meant homeowners earned about $17,000 in wealth, which is the largest such increase since 2014. Collectively, Americans earned an extra $1 trillion in home equity.
A surge of home prices and home appreciation was driven by the buyer-hungry market. It also put a strain on home inventory. CoreLogic projects home equity will continue to increase in the coming months as more people enter the new year with renewed hopes of reaching their dream of homeownership.
Over the next year, however, the pace at which home equity will rise could slow as inventory concerns ease with new residential construction projects getting underway.
For many, the positive market has been a silver lining in an otherwise difficult year. As a homeowner, you may be wondering what this could mean for you.
Homeowners with equity, or the amount the home is worth subtracted by what is owed, have several options. Tapping into your equity opens the door to a home equity loan, home equity line of credit or a cash-out refinance.
A home equity loan puts the equity in your home to work for you. Lenders will work with you to leverage the equity to structure a second mortgage.
A home equity line of credit works a little differently. As the name suggests, it is a line of credit with a limit that’s tied to whatever the equity will provide.
A cash-out refinance allows the homeowner to borrow above what is owed on the mortgage and receive a lump sum of money.
The real estate market continues to be a bright spot, empowering homeowners with new wealth and opportunities to gain financial flexibility. To learn more about these opportunities, please contact our offices today.
