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If you own a home, your net worth likely just got a big boost thanks to rising home equity. Equity is the current value of your home minus what you owe on the loan. And today, based on recent home price appreciation, you’re building that equity far faster than you may expect – here’s how it works. dBecause there’s an ongoing imbalance between the number of homes available for sale and the number of buyers looking to make a purchase, home prices are on the rise. That means your home is worth more in today’s market because it’s in high demand. As Patrick Dodd, President and CEO of CoreLogic, explains:“Price growth is the key ingredient for the creation of home equity wealth. . . . This has led to the largest one-year gain in average home equity wealth forowners. . . .”
Basically, because your home value has likely climbed so much, your equity has increased too. According to the latest Homeowner Equity Insights from CoreLogic, the average homeowner’s equity has grown by $64,000 over the last 12 months. While that’s the nationwide number, if you want to know what’s happening in your area, look at the map below. It breaks down the average year-over-year equity growth for each state using the data from CoreLogic.The Opportunity Your Rising Home Equity ProvidesIn addition to building your overall net worth, equity can also help you achieve other goals like buying your next home. When you sell your current house, the equity you built up comes back to you in the sale. In a market where homeowners are gaining so much equity, it may be just what you need to cover a large portion – if not all – of the down payment on your next home. So, if you’ve been holding off on selling or you’re worried about being priced out of your next home because of today’s ongoing home price appreciation, rest assured your equity can help fuel your move.Bottom LineIf you’re planning to make a move, the equity you’ve gained can make a big impact. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, let’s connect so you can get a professional equity assessment report on your house.
Real Estate •
July 5, 2022
The Average Homeowner Gained $64K in Equity over the Past Year
Real Estate •
June 30, 2022
Homeownership Is a Great Hedge Against the Impact of Rising Inflation
If you’re following along with the news today, you’ve heard about rising inflation. Today, inflation is at a 40-year high. According to the National Association of Home Builders (NAHB): “Consumer prices accelerated again in May as shelter, energy and food prices continued to surge at the fastest pace in decades. This marked the third straight month for inflation above an 8% rate and was the largest year-over-year gain since December 1981.”
With inflation rising, you’re likely feeling it impact your day-to-day life as prices go up for gas, groceries, and more. These climbing consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile. If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.
Homeownership Helps You Stabilize One of Your Biggest Monthly Expenses
Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership. Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. When you have a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says: “A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same. That’s certainly not the case if you’re renting.” So even if other prices increase, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs.
Investing in an Asset That Historically Outperforms Inflation
While it’s true rising home prices and higher mortgage rates mean that buying a house today costs more than it did even a few months ago, you still have an opportunity to set yourself up for a long-term win. That’s because, in inflationary times, you want to be invested in an asset that outperforms inflation and typically holds or grows in value. The graph below shows how the average home price appreciation outperformed the average inflation rate in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation. So, what does that mean for you? Today, experts forecast home prices will only go up from here thanks to the ongoing imbalance of supply and demand. Once you buy a house, any home price appreciation that does occur will grow your equity and your net worth. And since homes are typically assets that grow in value, you have peace of mind that history shows your investment is a strong one.
That means, if you’re ready and able, it makes sense to buy today before prices rise further.
Bottom Line
If you’ve been thinking about buying a home this year, it makes sense to act soon, even with inflation rising. That way you can stabilize your monthly housing cost and invest in an asset that historically outperforms inflation. If you’re ready to get started, let’s connect so you have expert advice on your specific situation when you’re ready to buy a home.
Real Estate •
June 23, 2022
New home? Here’s what you should know about property insurance premiums.
(BPT) – Much of the country is still in the middle of a red-hot real estate market. Home values are rising due to high demand and first-time homebuyers should be aware of how the value of their home impacts the way their home insurance premiums are calculated. Location and structure type are two examples of considerations that can affect your premiums, but so do the features of the home, policy limits, and, in some states, even a homeowner’s personal finances. Policyholders should be aware of the variables that are factored into their insurance coverage.
Location
Location is perhaps the largest component when it comes to the costs of your insurance premium since it deals with exposure and hazard to the home’s physical structure. The type of home you have, where you live and the state or city in which you reside can drastically affect how much you will pay. In fact, location is such a primary factor that coverage in certain areas may require special policies.
For example, many homeowners moved from the city to the country during the pandemic and found that they now live in wildfire- or flood-prone areas and that additional coverage is needed due to environmental risk factors not covered under available homeowners insurance policies in the area. Homeowners living in or near large urban areas may find that their premiums cost more due to the higher cost for construction or repairs.
Take a close look at what factors are impacting the cost of your home insurance rate. The size of your home, regional vulnerability to natural disasters, and different building material options like brick or wood and their relationship to the environment may determine your premium’s cost.
Replacement cost
The more your home costs to replace, the more you will need in coverage to insure it.
“Replacement cost is a measure of the amount it would cost to replace or rebuild your home after a loss with a similar home of like kind and quality,” said Bonnie Lee, Mercury Insurance vice president of property claims. “This amount takes into account factors such as the square footage of your home, the local construction costs per square foot, and construction details unique to your home.”
While replacement costs refer to the cost of rebuilding a house to the same standard as before, it does not include features such as the neighborhood, amenities, and even proximity to schools which can affect a property’s attractiveness.
“Replacement costs and market value are often used interchangeably, but they are two completely different concepts. Market value accounts for how the neighborhood and its conveniences impact a property’s attractiveness to buyers, while replacement costs only refers to the expense of rebuilding a home after a loss,” Lee said.
Deductible
The insurance deductible is one of the most important parts of a homeowners policy and plays a significant role when determining insurance premiums. The deductible is the amount of money a policyholder must pay before the policy pays out for repairs or a loss.
For example, if covered damage to your home costs $20,000 and your deductible is $5,000, you would be responsible for the first $5,000 in damages and your insurance company would pay the remaining $15,000. Homeowners that pay a higher deductible may decrease the cost of their premiums, but may have to pay more out of pocket when filing a claim.
When researching and selecting a new home owner’s insurance policy, you’ll want to consider all of these factors to get the best coverage for your needs at a reasonable cost.
