How to Increase Your Equity Over the Next 5 Years
There are lots of questions about the real estate industry focus on home prices and where they are heading. The most recent Home Price Expectation Survey (HPES) helps target these projected answers.
Here are the results from the Q2 2019 Survey:
- Home values will appreciate by 4.1% in 2019
- The average annual appreciation will be 3.2% over the next 5 years
- The cumulative appreciation will be 16.8% by 2023
- Even experts representing the most “bearish” quartile of the survey project a cumulative appreciation of over 6.7% by 2023
What does this mean for you?
A substantial portion of family wealth comes from home equity. As the value of a family’s home (an asset) increases, so does their equity.
Using the projections from the HPES, here is a look at the potential equity a family could earn over the next five years if they purchased a $250,000 home in January of 2019:
Based on gains in home equity, their family wealth could increase by $42,000 over that five-year period.
What Is Equity?
Basically, equity is the difference of what you still own on your home mortgage and what your home value is worth today if you were to sell it. That number is money in your pocket.
Equity is built over time based on how quickly homes are appreciating (or rising in value). Home appreciation rates have shot up very quickly over the last five years but are expected to slow down a little starting in late 2019.
The Best Way To Build Your Equity
Hands down, the best way to build your equity is to keep tabs on the interest rates. In July 2019, the Federal Reserve dropped interest rates by a quarter of a percent.
If you haven’t already, I’d strongly urge you to take action now and quickly refinance at this lower rate. The less interest you have to pay on your mortgage, the more money you get to keep in your pocket.
Another very effective way to lower your mortgage payment quickly over time is to make one extra payment per year. That’s right. Make 13 payments instead of 12. Each time you do, you’ll save significantly on interest and take a small bite out of your principal balance each time.
Home Ownership Builds Wealth
If you don’t yet own a home, now may be the time to purchase. Owning or moving up to your dream home could allow you to ride the increase in equity of a growing asset. Grab your house now while the interest rates are at their lowest. They will only go up from here and you’ll wish you hadn’t waited.
Home Price Expectation survey – Every quarter, Pulsenomics surveys a distinguished panel of over 100 economists, investment strategists, and housing market analysts regarding their 5-year expectations for future home prices in the United States.
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