The Gift of Time

The impacts of the housing crisis are finally fading, even for those who purchased homes just ahead of the Great Recession.

Homeownership has once again returned as an engine of wealth creation – even for those who purchased homes just ahead of the Great Recession. Millions of homeowners were buoyed by a healing, if not fully healthy, housing market and the essential precondition to achieving home equity gains – time.

The National Association of Realtors recently published data on home equity gains over time. On average, home sellers gained 23 percent in home equity, or about $40,000, but those numbers vary widely based on when homeowners purchased their houses. Even those who purchased a home just before the recession saw gains of about 1 percent, or $3,000.

Home equity depends on two things: the current market value of a home, and the amount of money left to pay back on a mortgage. The difference – market value minus remaining mortgage balance – is home equity. As homes gain value over time and homeowners make mortgage payments, home equity increases.

In the wake of the housing crisis, home equity has been of concern. “Underwater” became part of the everyday lexicon referring to those who owed more than their property was worth. However, homes purchased in the years between the depths of the crisis and today have made double-digit gains in equity, according to the National Association of Realtors’ data.

 

Those who are selling homes purchased more than 21 years ago saw the largest gain in equity, of 145 percent (about $138,000). Those who are selling homes purchased between eight and 10 years ago – or between 2005 and 2007, just prior to the housing crisis – have seen only a 1 percent gain in equity (or about $3,000). More here.

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