Case in point. The last real estate down turn, saw a lot of homeowners lose their home to foreclosures and short sales. Some people chose to sell their home on a short sale even though they could still afford the home. They bought into the notion that the investment that they had was losing money and had to be cut. My argument was that once you sold your home that was under water, you would be paying rent anyways and actually be throwing money away.
Now that we are out of that nasty down turn, most if not all of those properties that were under water are now back "in the money". The homeowners that sold short or let it go to foreclosure? Most of them can't afford a home at these prices now.
Over the next five years, home prices are expected to appreciate 3.22% per year on average and to grow by 17.3% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey .
So, what does this mean for homeowners and their equity position?
As an example, let’s assume a young couple purchased and closed on a $250,000 home in January. If we look at only the projected increase in the price of that home, how much equity will they earn over the next 5 years?
Since the experts predict that home prices will increase by 4.4% this year alone, the young homeowners will have gained $11,000 in equity in just one year.
Over a five-year period, their equity will increase by nearly $43,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.
