Home prices have increased significantly over the last year, which in turn has grown the net worth of homeowners. Appreciation and home equity are directly linked – as the value of a home increases, so does a homeowner’s equity. And with these recent gains, homeowners are witnessing their financial stability and well-being grow to record levels.
In more good news for homeowners, the most recent Home Price Expectations Survey – a survey of a national panel of over one hundred economists, real estate experts, and investment and market strategists – forecasts home prices will continue appreciating over the next five years, adding to the record amount of equity homeowners have already gained over the past year. Chicago is no exception, as the local housing market also follows this positive trend. Below are the expected year-over-year rates of home price appreciation from the report:
What Does This Mean for Homeowners?
Home prices are climbing today, and the data in the survey indicates they’ll continue to increase, but at rates that approach a more normal pace. Even still, the amount of household wealth a homeowner stands to earn going forward is substantial. This truly becomes clear when we consider a scenario using a median-priced home purchased in January of 2021 and the projected rate of appreciation on that home over the next five years.
As the graph below illustrates, a homeowner could increase their net worth by a significant amount – over $93,000 dollars by 2026.
Home Price Appreciation and Home Equity
CoreLogic recently released its quarterly Homeowner Equity Insights Report, which tracks the year-over-year increases in equity. It shows an average annual gain of $33,400 per borrower over the past 12 months.
In the report, Dr. Frank Nothaft, Chief Economist for CoreLogic, further explains:
“Double-digit home price growth in the past year has bolstered home equity to a record amount. The national CoreLogic Home Price Index recorded an 11.4% rise in the year through March 2021, leading to a $216,000 increase in the average amount of equity held by homeowners with a mortgage.”
The expected, sustained growth of home prices means homeowners can continue to build on the past year’s record levels of home equity – and their financial prosperity. It also presents today’s homeowners with a unique opportunity: using their growing equity for a home upgrade.
With so few homes available to purchase and strong buyer demand, there may not be a better time to sell your current house and move into one that better meets your needs.
What Expert’s Saying?
Home prices are expected to keep appreciating over the next five years, making equity gains one of the quickest ways to build household wealth. If you’re a current homeowner in Chicago and ready to look at ways to leverage your built-up equity, connect with local real estate professionals to discuss your options.
