Most homeowners are benefiting from a substantial increase in home equity from this past year. If you’re a homeowner, should you do anything with the increased equity? This article discusses two approaches to consider.
Home equity increased a lot in the past year. Here’s what you can do with it.
(Washington Post) The biggest holiday gift this year for millions of Americans does not fit under a tree and can be a little hard to grasp, but it may be of exceptional value: If you own a home, the odds are good that your equity holdings increased by thousands of dollars over the past year.
New quarterly data released by the Federal Reserve reveal that U.S. homeowners’ equity grew by $1.02 trillion in the 12-month period ending Sept. 30. A giant national number like that may make your eyes glaze over and be difficult to relate to personally, but calculations from analytics and valuation technology firm CoreLogic bring it down to earth: Owners on average had a $12,500 gain in equity during that period. In hot real estate markets on the West Coast, the average was $25,000 or more.
How did your house fare? Unless you follow listings and sales closely in your neighborhood, you might have missed what has been happening to your own equity. Property values jumped in the past year in most major markets primarily because of rising prices fed by low interest rates and tight inventories. Nationwide, they were up 5.8 percent year over year, according to CoreLogic. Reductions in mortgage principal debts through regular amortization played a role, as did refinancings by owners into loan types with shorter terms — mainly 15 years — and faster payoffs of principal. Renovations of homes pushed up values as well.
Unfortunately, not everybody had gains. Zillow, the online real estate marketplace and research site, reported last week that more than 1 owner in 10 in the United States continues to have negative equity, but that figure has plunged by nearly two-thirds during the past 48 months as the economy has strengthened. And that figure is still shifting. CoreLogic says 384,000 homeowners with mortgages transitioned from negative to positive equity during the most recent quarter alone.
That’s great. But assuming you have been a beneficiary, what do you actually do with the “gift” of greater equity? Here are two strategies: . . . (read the rest)