“For most families, their home is their largest financial asset.”
While growing up, we were taught by our parents and grandparents that owning a home is a financially savvy move. They explained how a mortgage is like a “forced savings plan.” When you pay rent, that money is lost forever. When you make a mortgage payment, much of that money accumulates as equity in the home. So, what exactly is equity?
The equity in your home is the amount of money you can sell it for minus what you still owe on the mortgage. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe. That reduction of your mortgage every month increases your equity.
A recent study by CoreLogic explained that homeowners gained substantial equity over the last twelve months, and are essentially sitting on large sums of cash in their homes. In the study, Frank Nothaft, Chief Economist for CoreLogic explained:
“The CoreLogic Home Price Index recorded a quickening of home price gains during the fourth quarter of 2019, helping to boost home equity wealth. The average family with a mortgage had a $7,300 gain in home equity during the past year, and a total of $177,000 in home equity wealth.”
For most families, their home is their largest financial asset. This increase in equity drives the net worth, or family wealth, of the homeowner. Renters are not earning that benefit. Instead, they’re building the net worth of their landlord.
Bottom Line
Home price growth will moderate during the pandemic. But once a cure is available, most experts agree that home values will again begin to appreciate at levels similar to what we’ve seen over the last several years. In the long run, our family elders will be proven correct: owning a home is a savvy financial move.
To view original article, visit Keeping Current Matters.
What’s Causing Ongoing Home Price Appreciation?
Experts forecast ongoing home price appreciation thanks to the lingering imbalance of supply and demand.
Think Home Prices Are Going To Fall? Think Again
If you’re planning to buy a home, you shouldn’t wait for home prices to drop to make your purchase.
Why Pre-Approval Is a Game Changer for Homebuyers
Pre-approval from a lender helps you understand your true price range and how much money you can borrow for your loan.
Wondering Where You’ll Move if You Sell Your House Today?
A trusted real estate agent will help you think through the pros and cons of new and existing homes to help you make your best decision.
Housing Experts Say This Market Isn’t a Bubble
Lending standards are tighter due to lessons learned and new regulations enacted after the last crisis.
Expert Housing Market Forecasts for the Second Half of the Year
Housing supply is increasing, but there are still more buyers than there are homes for sale, maintaining the upward pressure on home prices.