Posted on September 26, 2018 by shawn_manwaring
One of the big takeaways from the survey recently produced is that over the next five years, home prices will appreciate 3.5% per year on average and cumulatively will grow by around 18%. So we set out to answer the question of how do rising prices impact home equity?
So what does this mean for homeowners and their equity position?
For example, let’s assume a young couple purchased and closed on a $250,000 home in January of this year. If we only look at the projected increase in the price of that home, how much equity would they earn over the next 5 years?
How do Rising Prices Impact Home Equity?
Since the experts predict that home prices will increase by 4.5% this year alone, the young homeowners will have gained over $11,000 in equity in just one year. This is a larger equity gain than the 4 years that follow it but nonetheless a great way to start your path to building equity!
Over a five-year period, their equity will increase by over $46,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth. Just like saving for retirement, the earlier in life you start building equity, the more wealth it will accumulate as you age.
Not only is homeownership something to be proud of but it also offers you and your family the ability to build equity you can borrow against in the future. If you choose not to borrow against the equity you have built than your net proceeds of a sale end up being that much higher when you decide to sell the property. If you are ready and willing to buy, find out if you are able to today!
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