If you’re a homeowner, you’re in luck. US homeowners are currently enjoying a boom in residential equity value. According to CoreLogic’s Homeowner Equity Insights Report, approximately 63 percent of US homeowners are experiencing an equity increase of more than 10.8 percent year over year between Q3 of 2019 and Q3 of 2020. That represents a combined equity value of more than $1 trillion in just one year. During the same period, negative equity fell by 18.3 percent year over year, resulting in greater security and financial stability for hundreds of thousands of homeowners.
Much of this increase is due to the price growth generated by historically low interest rates and rising consumer demand. Tight inventory in many real estate markets resulted in multiple offer situations and homes selling well above asking price—and above comparable market values.
In addition, some markets that generally do not see significant price fluctuations became more desirable as in-town dwellers sought increased space in suburban and rural areas. Generous long-term work-from-home policies further boosted the appeal of these markets which were often seen as safer and more cost-effective.
While rising home prices initially generated fears of a real estate bubble, economists predict continued strength in the real estate market at large as pent-up demand continues well into 2021. In addition, continuing record-low interest rates contribute to affordability
How to get the most out of your home’s equity
This increase in equity makes now a great time to sell or to otherwise tap into the equity in your home. If you are looking to put all of that unexpected potential to work, here are some things to keep in mind to maximize your home’s equity value.
Make needed repairs and improvements
Now is the right time for ensuring that your home is in tip-top condition. Many homeowners have spent the pandemic becoming intimately familiar with their home’s quirks and with small annoyances which had previously gone unnoticed. If you haven’t already, it’s time to start addressing minor problems before they become major ones.
If you have or are obtaining a home equity line of credit, use it to make needed repairs and to upgrade your space if needed. If your home is out of step with most of those in your area— either in square footage or in terms of fixtures and finishes—it may be time for an update. This will ensure both that you enjoy your time in the home and that you maintain it in a way that will make it more marketable when it comes time to sell.
Optimize virtual marketing opportunities
If you’re considering selling your home, talk to a real estate professional about virtual marketing platforms and strategies so that you can successfully compete with other homes on the market and engage with potential buyers. In many cases, obtaining top dollar for your home sale is a matter of ensuring that homebound or long-distance buyers have options, including video and virtual tours, that allow them to connect with the space.
Be sure to declutter your home and talk to an agent about strategies to optimize your home’s look on video. More light and a more streamlined look will go a long way toward ensuring that your home is properly positioned for eager buyers who are interested in your market.
Go for cost-effective upgrades
If you’re thinking about selling your home and want to make sure you get the most out of its current equity potential, opt for upgrades that offer high ROI along with cost-effectiveness. These include simple improvements like a new front door and updated landscaping for low-cost, high impact changes.
Be careful of the law of diminishing returns when making home improvements, however, as some perceived upgrades may not be right for your market. A huge new addition may make your home more livable but may also make it far too large for your neighborhood. An expensive and elaborate outdoor space may be fun in the summer, but may be out of step with buyer demand in your market. Ensure that the changes you make offer proven, reliable returns.
Consider refinancing to a 15-year mortgage
If you decide to stay put, you can boost your home’s equity by refinancing your current 30-year mortgage into a 15-year mortgage. The record-low interest rates currently on offer may make it possible for you to find a product with much faster equity-building potential while keeping your monthly payments almost the same.
In order to get the benefit of a mortgage refinance, make sure you plan to stay in the home for a while— ideally, at least five years. Remember, just as with your original mortgage, there will be significant closing costs associated with your refinance. You may not be able to recoup those costs if you move within a couple of years, even with the equity-boosting benefit of the new mortgage.
Talk to a real estate agent about your plans
Home values are changing by the day, it seems, and no one is better positioned to understand the impact on today’s market than a real estate agent or broker. He or she can help you crunch the numbers, examine sale prices for comparable properties in your area, and come up with an updated market valuation based on current conditions.
In addition, if you are planning to make changes to your home, a real estate agent is positioned to help you determine what buyers are looking for right now and to connect you with contractors and installers who can assist you with reliable service. If you are looking to refinance, a real estate agent is the best source of information and introductions to reliable mortgage providers in your area.