Home Equity Rebound

Homeowner equity holdings have soared by nearly $2.1 trillion last year to a staggering $10 trillion, helping to stir up the stagnant market.

There is cause for celebration. Yep, we said it. Despite the fact that the Great Recession sent the economy plummeting and the housing boom crashing down, home equities throughout the US are rebounding. To be accurate, they’re soaring,

In the US, homeowner equity holdings – the estimated market value of a home minus the mortgage debt owed – soared by nearly $2.1 trillion last year to a staggering $10 trillion.

While the term “equity” may have previously reddened the face and raised the temper of many a homeowner, it’s taken a turn for the better. Like we said, there’s cause for celebration.

Why is positive equity so important? Because it encourages individuals to move. Literally. Positive equity makes buying and selling not just a viable option, but an attractive one. However, negative equity makes the housing market stagnant.

Ken Harney’s recent Seattle Times article, “Big rebound in home equity,” explains:

Thanks to rising prices and equity levels, about 4 million owners around the country last year were able to climb out of the financial tar pit of the housing bust — negative equity.

Negative equity gums up people’s lives and the real estate marketplace as a whole.

It makes it difficult or impossible for many owners to refinance out of a higher-cost mortgage into a more affordable one.

It makes it painful to sell — you’ve got to bring cash to the table to pay off what you still owe to the bank.

Plus almost no one wants to lend you money, at least not at reasonable interest rates secured by your real estate, when you’re deeply underwater.

So you’re likely to spend less, invest less, and you’re probably not going to buy another house. Nor will potential new buyers be able to purchase yours.

So when 4 million owners manage to transition out of negative equity into positive territory, that’s significant news not just for them personally, but for the economy overall.

What else does Harney have to say about the rebounding equity in the US? Find out in the full version of hisarticle.

Additional Fun Fact: Many of the statistics cited in Harney’s article are taken from the real estate analytics firm CoreLogic’s 2013 Fourth Quarter Equity Report. He cites the top five states where mortgage residential properties have positive equity. Washington is not among them. However, it’s also not far behind. The five leading states have positive equities ranging from 95.4 – 96.1 percent. Washington has an impressive, though slightly lower, 90.3 percent positive equity.


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