Rising Equity for Homeowners in 2013

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equityAs 2013 begins, one of the most encouraging facts in the mortgage business is that homeowner’s equity is growing! A homeowner’s equity is defined as the difference between the market value of the house and the amount of mortgage debt it is carrying. The equity in a home is a key factor of wealth, often the largest single thing that families have on their balance sheet.

According to Kenneth Harney, award winning Real Estate journalist and author of the column “The Nation’s Housing”, this is a significant piece of good news following five years of declines and stagnation. After hitting a low in the final three months of 2011, Americans’ combined home equity jumped almost $1.3 trillion during the next nine months! This was a 20% gain according to the “flow of funds” quarterly estimate released in December by the Federal Reserve.

This important turnaround reflects the first sustained rebound in home prices in a long time. This is essential because in a study released just before Christmas, researchers at Zillow found that in 177 major metropolitan markets, 135 experienced net increases in cumulative home values during 2012. So, taking this into consideration, the odds are good that even if you own in a market that may have experienced severe price declines during the housing market crash, the value of your house probably rose last year, even if it was only a small amount.

And if you still have negative equity,  your equity position has most likely improved or will in the near future due to the appreciation of home values in your area. In addition, Realtor.com shows that some of the most dramatic gains in values were in the areas that suffered the biggest downfalls in home prices from 2007-2011. Some of the statistics released showed that houses in the Phoenix area increased by 21.4% in the past year, and homes in the Riverside-San Bernardino area increased by 13.3%.

Finally, according to Harney, market appreciation should lead to more sellers being persuaded to list their homes, which will push the inventory higher, creating  a healthier and more balanced real estate market and environment for 2013.

If you have any questions about the equity in your home or want to discuss any aspect of home financing, please feel free to contact me!




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