If you are house hunting in today’s market, you won’t be surprised to know there is a housing shortage. You might be tempted to think it’s a side-effect of the pandemic. In fact, this shortage is due in large part to the lack of new housing units being built. This situation is making many homeowners wealthy through the increasing equity in their homes.
In years past, popular destination cities saw housing prices escalate due to limited housing stock. Today, that is happening across the country, no matter the geography. A recent article in the New York Times, detailed the massive increase in home equity, “Over the past two years, Americans who own their homes have gained more than $6 trillion in housing wealth.” That is a pretty staggering number.
What does it really mean to the average homeowner?
The benefits accrue to the 64.8% of American households who own their own homes. That figure comes from the census bureau. If you are one of these lucky homeowners, you might be wondering how to access that equity or secure it for the education of your children.
The large increase in home equity, coupled with historically low interest rates, has seen many homeowners take the leap to draw on that equity with a loan or line of credit. Even with interest rates rising, for some, the ability to gain more space or more usable space makes the idea of tapping into equity very enticing. Before you embark on securing a home equity loan to remodel, add an addition or reconfigure your home, you’ll want to explore the pros and cons of what it means today, and for your future.
The memory of the housing bubble that burst in 2008 still holds some homeowners back. At that time, housing prices crashed due to risky investments and subprime lending, causing a devastating number of homeowners to default on their mortgages and lose their entire investment. The good news is most reputable sources suggest that today we are not experiencing a bubble, but a situation brought on by historically low amounts of housing stock. The reason it is affecting the entire country may have a great deal to do with the migration of families moving from high-priced metropolitan areas to less-populated cities and towns. Some are renters who want to become first-time home buyers. Others are homeowners who sold their high-priced houses and moved to locales where homes are moderately priced, giving them a cash-in-hand advantage. As another NY Times article suggests, a buyer coming in from a large metropolitan center may see home prices as reasonable in a smaller city or town, but the same prices may cause sticker shock for a local home buyer, as bidding wars drive home prices higher than they can afford.
All these factors may be encouraging some homeowners to stay where they are until the market cools. That could take some time, which is one of the reasons a large number of homeowners decided to remodel or renovate their current residences in 2020 and 2021.
If you are thinking about tapping into your equity to make changes to your home and want to explore what design opportunities might best fit your lifestyle, budget, and current site structure, we’d love to discuss your options.