Why is Home Equity Making a Comeback in the U.S.?

There's definitely cause for celebration as the housing market in the U.S. appears to be improving and the amount of equity that the average homeowner has in his or her home is continuing to grow. However, many people still want to know why home equity is making a comeback in the US. Below, we’ve listed some of the reasons.

The housing market in the U.S. is beginning to improve, and the amount of equity that the average homeowner has in his or her home is now on the rise. As you might guess, this is not only a good sign for the average homeowner, but also a good sign for everyone else in the United States, as it is a clear indication that the economy is on the mend. In fact, more home equity means more money going into people's bank accounts when they sell or refinance, which, in turn, means more money for everyone else. As a result, there are a number of people throughout the country celebrating the fact that home equity appears to be making a comeback in the U.S. The question, however, remains the same. Why is this happening?

Unfortunately, this question is more difficult to answer than you may think. There are a number of different factors that affect the housing market and that appear to be playing a major role in the home equity comeback - low interest rates, the rise in home values, and improvements in the way that people are using their equity.

Interest rates are still extremely low because the U.S. government has been specifically trying to keep them down with the hope that lower rates would improve the housing market. It seems that the government's plan is working, as many investors and first-time homebuyers are now taking advantage of the lower interest rates and the lower home values to buy property. Homes are now selling much faster than they were before, and this is causing the number of homes on the market to decrease and the value of each individual home to increase. In fact, homes are selling approximately 25% faster than they were a year ago, there are nearly 20% fewer homes on the market, and the value of the average home has increased anywhere from 2 to 25%, depending on the region in which the home is located.

The rise in home values that has occurred as a result of the low interest rates and the decrease in the number of homes available ultimately led to an increase in the amount of equity that most people have in their homes. This is because, as the value of each home rises, there are less and less people who are underwater on their mortgages and more and more people that actually have equity in their homes. The average person, therefore, has more equity to leverage, and many people are beginning to look for ways to protect and/or invest their equity. This newly kindled desire to protect and grow the equity that people have now earned or regained has led to an increase in the number of homes purchased for investment purposes, the number of improvements made to homes to protect or increase their value, and the number of improvements that towns and cities are making to their communities. This has caused the overall value of homes in general to increase, and many people throughout the United States are now seeing the amount of value or, in other words, the amount of equity, that they own in their home increase, as a result.

Theresa is a guitar player from Michigan. She started her own band a couple of years ago and regularly plays clubs from all across the state. Writing is her second biggest passion after music.