UNDERSTANDING EQUITY IN HOME OWNERSHIP. WHY IT MATTERS
Owning a home is a significant accomplishment that comes with numerous benefits. However, one essential aspect of homeownership that often gets overlooked is equity. Building equity is crucial for homeowners since it can secure better mortgage rates, provide funds for a down payment, and increase the value of the home. Unfortunately, many homeowners don’t understand the concept of equity, let alone how to build it.
UNDERSTANDING EQUITY
Equity is the difference between the value of your home and the amount you owe on your mortgage. For instance, if your home is worth $500,000, and your mortgage balance is $300,000, your equity is $200,000. It’s important to note that equity is not the same as home value. Home value refers to the current worth of your property, while equity is an asset that has accumulated as you’ve paid off your mortgage over time. Equity plays a vital role in mortgage rates since lenders view borrowers with more equity as less risky and offer them lower rates. Moreover, homeowners with significant equity can sell their homes at a higher price.
THE BENEFITS OF EQUITY
Building equity has numerous benefits in homeownership. One of the primary advantages is that it can provide funds for a down payment when purchasing a new home. For example, if the value of your current home exceeds the mortgage balance, you can use the surplus equity to make a down payment on your new home. In addition, if you’re in a position to do so, purchasing a home in all cash can be a smart investment strategy, and equity can make that a viable option.
In the West Chester area, home values have been increasing rapidly. For instance, please check out the below chart which shows median sales prices for homes in the West Chester area over the last two and a half years.
| Westchester Area, Median Sale Price, Single Family Houses, 2021 through 2023 | |||||||
| Month | Sale Price | Sale Price | Difference | % Diff | Sale Price | Difference | % Diff |
| 2021 | 2022 | 22-21 | 2023 | 23-22 | |||
| Jan | $411,000 | $450,000 | $39,000 | 9.5% | $447,500 | ($2,500) | -0.6% |
| Feb | $430,000 | $453,275 | $23,275 | 5.4% | $467,450 | $14,175 | 3.1% |
| Mar | $466,403 | $480,000 | $13,597 | 2.9% | $480,000 | $0 | 0.0% |
| Apr | $446,551 | $490,000 | $43,449 | 9.7% | $528,420 | $38,420 | 7.8% |
| May | $478,700 | $495,000 | $16,300 | 3.4% | $525,000 | $30,000 | 6.1% |
| Jun | $466,150 | $540,000 | $73,850 | 15.8% | $540,388 | $388 | 0.1% |
| Jul | $449,050 | $535,000 | $85,950 | 19.1% | $507,000 | ($28,000) | -5.2% |
| Aug | $470,674 | $482,500 | $11,826 | 2.5% | |||
| Sep | $453,614 | $465,000 | $11,386 | 2.5% | |||
| Oct | $460,000 | $490,000 | $30,000 | 6.5% | |||
| Nov | $449,385 | $485,000 | $35,615 | 7.9% | |||
| Dec | $455,500 | $435,000 | ($20,500) | -4.5% | |||
| Annual | $453,086 | $483,398 | $30,312 | 6.7% | |||
| YTD, July | $449,693 | $491,896 | $42,203 | 9.4% | $499,394 | $7,498 | 1.5% |
| Sumary: | Year over Year Sales Price Up 11 of 12 months, 2022 to 2021 | ||||||
| Year over Year Sales Price Up 5 of 7 months, 2023 to 2022 | |||||||
| Prices still steady and going up in the West Chester Area. | |||||||
| Areas included, Westchester, Downingtown, Great Valley | |||||||
If you bought a house just 2 and one half years ago for the median price of $453,086, you would have increased equity of almost $50,000. If you bought your house more earlier than 2021, you would have even more equity.
A CMA, (Comparative Market Analysis) is a report that provides homeowners with an estimate of their home’s current value, the amount of equity, and how they can improve it. Obtaining a CMA is beneficial for homeowners who want to verify their property’s worth and understand their equity’s potential. It can also be used by homeowners who plan to sell their homes to determine a competitive price and ask for more in a home sale. If you would like a CMA for your house, please call or text me at 484 574 4088 or go on my web site at www.johnherreid.com and ask for a home value estimate.
Equity is a crucial aspect of homeownership that every homeowner should understand. Homeowners with more equity have more financial flexibility, including lower mortgage rates, funds for a down payment, and increased property value. By obtaining a CMA and making simple home improvements, homeowners can boost their equity’s potential, secure their financial future, and grow their wealth. Taking small steps now can lead to tremendous gains over time, making it well worth the effort.
WHAT YOUR HOUSE REALLY REPRESENTS
For many homeowners, a house represents not just a place of shelter and refuge, but also a major investment. This is especially true for those who have built up significant home equity over time. However, with mortgage rates fluctuating and economic uncertainty looming, some homeowners may be questioning whether it’s time to cash out and sell their homes. While concerns about mortgage rates are understandable, homeowners also need to consider their overall net worth when making this decision. Selling a home can have a significant impact on a person’s financial situation, so it’s important to weigh all the options carefully.
here is what you need to do to make the right decision for you
- Buyers: If you’ve been holding off on buying because you were worried the value of your home would go down, knowing home prices are stable and increasing is reasuring. It also gives you the opportunity to own something that usually becomes more valuable as time goes on.
- Sellers: If you’ve been waiting to sell your house because you were concerned about how changing home prices would affect its value, this should also reassure you. Even with the recent increase in mortgage rates, teaming with a real estate agent and getting your house on the market is the logical and smartest thing to do.
- It’s also important to remember that every local market is different. That’s why it’s essential to lean on an expert for the latest information on the market in your area if you’re planning to make a move. I would like to become that real estate expert upon whom you can lean.
- Do I think that now is a good time to buy that first house or to sell and make that move up buy? Again, absolutely yes.
- To get a quick update of what is new in real estate, click here to check out our new videos.
- Interested in what recent clients think of my service? Click here to read what they say.
- Interested to know what your house is worth? Click here to get the most extensive and accurate estimate of home value that is available on the Internet. No cost or obligation of course.
- No doubt, the housing market is shifting, and it can be a confusing place right now. I suggest that we connect so that I can help you make confident and informed decisions about what’s happening. Minimize the fear or uncertainty that could change your plans. If you’re unsure about how to make sense of what’s going on in today’s housing market, text or call me at 484-574-4088 or go to my web site, (johnherreid.com) and lets set up a time to meet, either on line or in person. I have the software so that we can meet virtually and make the best use of your time.
- If you’re looking to make that move up buy this year, I believe now is a good time to do it. The best way to ensure you’re up to date on the latest market insights is to partner with a trusted real estate advisor. Let’s connect. I would like to interview for the job of becoming your trusted real estate advisor.
- One of the biggest benefits of owning a home, regardless of your income level, is that it provides financial stability and an avenue to build wealth. By selling your house and leveraging your equity, it can be easier to pay for your next home. Let’s connect to find out how much equity you have in your current home and how you can use it to fuel your next purchase.
- There are still clear opportunities for sellers this spring. If you’re wondering if it’s the right time to make a move, let’s connect today.
- There are plenty of buyers out there right now trying to find a home that fits their needs. That’s because the job market is strong, and many people have the stable income needed to seriously consider homeownership. To put your house on the market and get in on the action, let’s connect
- There will be very unsettling headlines around the housing market this year. Most will be wrong.
- Let’s connect so you have an expert on your side to help you keep everything in proper perspective.