Equity Trends are More Complex than They Appear

After the housing market crash of 2007, many people have been apprehensive about where the market is headed. Housing prices have climbed recently, and they are higher than they ever have been before. Nevertheless, there may be reason to believe that prices are beginning to stabilize or stagnate in some areas, particularly in major cities. This is not to say that there is another impending crash, only that there is a limit to what people can pay for homes. Furthermore, though equity is high, the distribution of this equity is not even.

While in some urban areas, particularly in California, home equity is at an all-time high; equity in less populous cities is not nearly as impressive. According to Jann Swanson of Mortgage News Daily, California accounts for a whopping 39 percent of home equity in the nation. This is obviously good for people who own homes in California, but it says less about those who own homes elsewhere. Not only that, it makes it more difficult to purchase a home in California and other areas experiencing high equity.

Though it is obvious that home equity can be deceiving, the fact that prices have risen so drastically is promising for those selling homes. Newly built homes are selling better than older homes, which is a good sign for builders, who seem to have benefitted the most from the rising housing tide. Nevertheless, builders were doing well before the 2007 housing market crash, so this may not be as positive of a sign as it appears.

One way to look at the new trends in housing is to focus on burgeoning markets. While certain metropolitan areas in California and other regions may be reaching a limit, there are slightly smaller metros that may be poised to start booming. Denver, for instance, represents a healthy middle ground. The prices are not outrageously high now, but with the rising population, a rise in housing prices is to be expected. This means that homebuyers can snatch up homes for a reasonable price, but will be able to anticipate a rise in equity over the next few years. In Los Angeles, where prices are already so high, this is not as surefire.

Finally, when it comes to lending, you need to focus on the long-term. Regardless of how sure you are that the home you are buying will rise in equity over the next few years, you need to get a loan that is favorable and reasonable. Get multiple appraisals if necessary to ensure that you are getting a fair deal. This is true for both buyers and sellers. While home equity can certainly rise, it will not if there are unseen issues with the home that could hurt its value.

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