Why the Average Homeowner Has $319K in Equity

If you already own a home, have you ever stopped to think about how much wealth youve built up just from being a homeowner? As home values rise, so does your net worth. And, if youve been in your house for a few years (or longer), theres a good chance youre sitting on a pile of equity maybe even more than you realize.

 What Is Home Equity?

 Home equity is the difference between what your house is worth and what you owe on your mortgage. For example, if your house is worth $500,000 and you still owe $200,000 on your home loan, you have $300,000 in equity. Its essentially the wealth youve built through homeownership. Right now, homeowners across the country are seeing near-record amounts of equity.

According to the Intercontinental Exchange (ICE), the average homeowner with a mortgage has $319,000 in home equity.

Why Have Homeowners Gained So Much Equity?

The rise in equity can be credited to two key factors:

1. Significant Home Price Growth

Home prices have climbed dramatically in recent years. In fact, according to the Federal Housing Finance Agency (FHFA), over the past five years, home prices nationwide have risen by 57.1% (see map below):

This appreciation means your house is likely worth much more now than when you first bought it.

2. Longer Tenure in Homes

Data from the National Association of Realtors (NAR) also shows people are staying in their homes longer than they used to, with the average tenure now being close to 10 years (see graph below):

This increase means homeowners are benefiting even more from home values growing over time as theyre paying down their mortgages. Thats because the longer someone lives in their house, the more that home value grows, which directly increases equity.

And if youre one of those people whos been in their home for 10 years or more, know this according to NAR:

Over the past decade, the typical homeowner has accumulated $201,600 in wealth solely from price appreciation.

The Benefits of Having Home Equity

What does this mean for you? Your house might be your biggest financial asset and it could open some exciting opportunities for your future. Lets break it down. 

Moving to Your Next Home

Your equity could help you cover the down payment for your next home. In some cases, it might even mean you can buy your next house in all cash, especially if youre looking to downsize or move to a less expensive area.

Financing Home Improvements

Thinking about upgrading your kitchen, adding a garage, or tackling other key projects? If you do it right, your equity can provide the funds to make those improvements happen, increasing the value of your home and making it more enjoyable to live in, too.

Starting a Business

If youve been dreaming about starting your own business, your equity could be the kickstart you need to make it happen. Whether its for startup costs, equipment, or marketing, leveraging your homes value can help bring your entrepreneurial goals to life while driving your long-term earning potential forward. 

Fueling Your Retirement

Your home equity could be the key to funding your next chapter, too. By downsizing or moving to a more affordable area, you can unlock cash to support your retirement goals or invest in the lifestyle youve been hoping for all while simplifying your living situation.

Bottom Line

Whether youre thinking about selling, upgrading, or simply want to understand your options, your home equity is a powerful resource and your trusted RE/MAX agent can help you understand exactly what youre working with.

Want to find out how much your home is worth? Send me a quick reply, and Ill do a professional assessment for you. The real number may surprise you.