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The lack of inventory continues to drive the growth in entry-level home pricing. The high demand for homes in this tier of the market makes it a great time to consider using your equity to move up to a bigger, more premium home.
The Effect on Equity
Rising home prices have seen a focus on whether they’re accelerating too quickly and how sustainable their growth in prices really is. One of the most overlooked benefits of rising prices, however, is the impact they have on a homeowner’s equity position. Home equity is known as the difference between a home’s fair market value and the outstanding balance of all liens on the property. While homeowners pay down their mortgages over time, the amount of equity they have in their homes increases with its overall value.
Today, the number of homeowners that currently have significant equity in their homes is growing. According to the Census Bureau, 38% of all homes in the U.S. are currently mortgage-free. ATTOM Data Solutions reported in a recent home equity study that of the 54.5 million homes with a mortgage, 26.7% of them have at least 50% equity, a number which has been increasing over the past eight years.
Inventory Terms for Entry-Level Home Owners
Spurred by low mortgage rates, the uptick in demand has left available inventory in the U.S. depleted. As a whole, the volume of new listings has decreased by 5.3% over the year for entry-level homes. Homes priced under $200,000 have dropped by 15.2% and mid-tier inventory, priced between $200,000 and $750,000, have dropped by 4.3% as well.
The National Home Association of Homebuilders recently reported that new construction, which is poised to increase in the coming year, will be targeted to provide a move-up opportunity for families who are looking to upgrade from their current homes.
Now is a great time to consider using your equity to move into a better home. When you upgrade your home, you may be able to find the amenities you’ve been dreaming of- such as a larger yard, larger master bath, entertainment space, or a garage so you can finally park your car inside. Whatever it is, if you’re moving out of an entry-level home, you’re likely going to be in the driver’s seat as a seller.