Why Your Home Equity Still Puts You Way Ahead

If you’ve seen headlines about home prices dropping, it’s easy to wonderwhat that means for the value of your home too. Here’s what you reallyneed to know.Even with small price declines in some markets, data shows you’re likelystill way ahead. And that’s thanks to your home equity.The Relationship Between Home Prices and EquityHome equity moves in sync with home prices. When prices rise, equitybuilds. When prices cool (even just slightly), equity growth does too. Here'show that’s played out lately.After the record-setting home price surge of 2020 and 2021, a little coolingwas inevitable.Back then, the number of homes for sale hit a record low. That causedhome values (and your equity) to shoot up significantly as buyers foughtover limited inventory.But prices couldn't continue to rise at that intense pace forever. Themarket had to moderate at some point, and that’s exactly what we’reseeing right now.As more homes have come on the market this year, price growth slowed –so, equity gains did too. And that doesn’t mean you’ve lost ground.Putting it into PerspectiveYou probably still have far more equity than you did just a few years ago.And that puts you in a strong position if you want to sell. Here’s the data toprove it.According to research from Zillow, home prices have risen a staggering45% nationwide since March of 2020. That’s a big jump.And in the majority of markets, prices are still rising, just at a much slowerpace. But even in the metros where prices are experiencing the biggestdeclines (the ones making the headlines), the average drop is only about-4%.So, what’s that really mean? In most places, prices are on the rise, so thisisn’t even a concern. But in the few metros where prices are cooling off a bit,the 5-year gains more than offset those small dips.

In other words, these modest declines can’t erase years of growth.Homeowners who’ve been in their houses for several years are still wayahead. Big time. And that’s true pretty much everywhere.Data from the Federal Housing Finance Agency (FHFA) helps paint thispicture. Let’s cast a slightly wider net and look at a state-by-state level thistime. Every single state has seen prices go up over the last 5 years. And thatmeans homeowners in each state have much more equity than they didjust 5 years ago (see graph below):

Odds are, in most places, if you’ve owned your home for more than a fewyears, you’ve already built the kind of equity many people could only dreamabout before the pandemic. And if you sell, you can use it to help youdownsize, or move up.And just in case you’re worried prices will crash and your equity will take abigger hit in the near future, here’s what Jake Krimmel, Senior Economist atRealtor.com, has to say:“The slight recent declines in aggregate value and total homeequity are not cause for concern . . . Although the market iscoming into better balance, large price declines nationally areextremely unlikely in the near term . . .”The price moderation we’ve seen lately isn’t a cause for concern. It’s asignal of a market that’s finding its balance again after several years ofunsustainable price growth. And after several years of major priceappreciation, most homeowners are still in an incredibly strong position.Bottom LineEven with prices coming down in some markets, today’s homeowners arestill sitting on near record amounts of equity.If you’re wondering how much equity you have (or how far ahead you reallyare), let’s connect.You might be surprised by what your home is actually worth today.