Feeling a little richer recently despite the roller-coaster swings in the stock market and your IRA and 401(k) balances? Maybe.
If you’re a homeowner, odds are that your equity has been growing steadily since 2012 and is higher today than it has been in years.
Household financial data released recently by the Federal Reserve show that Americans’ real-estate equity holdings rose a stunning $1.3 trillion from the second quarter of last year to the same period this year. Home-equity holdings have more than doubled since 2011, from just more than $6 trillion to more than $12 trillion.
That doesn’t mean your own home equity has doubled. If the local market is still struggling, your equity might have remained flat or even be negative.
For most owners, though, the news is good.
Real-estate equity is the difference between the current market resale value of your home and your mortgage debt. Equity grows when you pay down your mortgage, you make capital improvements that enhance the value of your property, and home prices increase in your area.
According to the latest S&P/Case-Shiller index of 20 cities, home prices rose by about 4.5 percent from June 2014 to this June. That’s more than double the inflation rate.
Home equity is important not only for the economy but also to millions of owners who are still underwater. Real-estate analytics company CoreLogic reported last week that from April to the end of June, almost 760,000 owners in the United States moved into positive equity territory, thanks primarily to rising prices.
About 46 million homeowners with mortgages have positive equity, CoreLogic reported, but 5.4 million others are underwater, or owe more on their loans than their home is worth. If prices increase by an additional 5 percent from now to July 2016, CoreLogic estimates that an additional 800,000 homes should cross into positive equity.
