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What comes to mind when you think of homeownership? You might focus on the non-financial benefits of homeownership, such as the sense of security or stability it offers. Would equity play a role, too? Owner’s equity plays a significant role in building long-term wealth over time, although it is often overlooked. Let’s examine what equity is and why it matters.

Homeowners’ equity is the current value of their home minus the amount they owe on the mortgage. This means that as the value of your home rises, so does your equity. That’s what we’re seeing now. There are not enough houses for sale to meet buyer demand in the current market, resulting in multiple offers and bidding wars. This situation has caused the prices of homes to rise. That’s because people are willing to pay more to buy a home. As things stand, the low supply and high demand are boosting equity for existing homeowners.

CoreLogic’s Chief Economist, Dr. Frank Nothaft, explains it this way:

Home price growth is the principal driver of home equity creation. The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.

Using CoreLogic’s Homeowner Equity Insights, we can evaluate how home value increases have affected equity. This report shows that the average Denver homeowner’s equity increased by $78,000 in the last year.

Do you want to know how your state ranks? Find out the average equity gain in your area by viewing the map below.

The Average Homeowner Gained over $56,700 in Equity over the Past Year | Simplifying The Market

What rising equity means to you

Home equity can increase not only your wealth but also open doors for reaching your goals. This is how it works: When you sell your home, you get back the equity you built up. If your needs have changed or you need a new home, you can use the proceeds from the sale to help fund your next move.

If you’re considering homeownership, understanding the importance of equity can help you realize why it is a worthwhile goal to reach. In other words, it will help you build your wealth, and it will make you feel secure about your investment, not just from a lifestyle perspective but from a financial one as well.

Bottom Line

If you’re a homeowner in Denver or planning to become one, you should know how equity works and why it matters. Please connect with me if this encourages you to make a move. We can discuss your options and determine what steps to take next.

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