SELLERS September 25, 2023

Unlocking Your Southern California Home Equity: A Seller’s Guide

Are you a homeowner in Southern California contemplating the sale of your house? If the current mortgage rates have you second-guessing your decision, you’re not alone. Many homeowners are hesitant to sell in a rising interest rate environment. However, it’s crucial to understand that while rates may be on the rise, so is the value of your home equity. In this blog post, we’ll delve into what home equity is, how it’s growing, and how it can help you make informed decisions in today’s real estate market.

Understanding Home Equity

Let’s start with the basics. What exactly is home equity? In simple terms, it’s the portion of your home that you’ve paid off and now own outright. It’s the difference between your home’s current market value and the outstanding balance on your mortgage. As time passes, your home’s value tends to increase, and as you pay down your mortgage principal, your equity stake naturally grows.

The Soaring Growth of Home Equity

Now, here’s the exciting part: your equity has been accumulating at a remarkable pace in recent years, particularly in the Southern California housing market. To put things into perspective, CoreLogic reports that the average homeowner in the United States now possesses approximately $290,000 in equity. This impressive figure is a result of surging home prices that have enabled homeowners to build equity more rapidly than usual. While the market has stabilized somewhat, high demand for homes continues to push prices upward.

According to the Federal Housing Finance Agency (FHFA), Census data, and property data provider ATTOM, nearly 69% of homeowners either have fully paid off their mortgages or hold at least 50% equity in their homes. This means that a significant majority of homeowners have substantial equity at their disposal.

Leveraging Your Equity for Greater Affordability

You might wonder how this burgeoning home equity can alleviate your concerns about affordability in today’s real estate market. Here are a couple of ways:

Become an All-Cash Buyer: If you’ve lived in your current home for an extended period, you might have accumulated enough equity to purchase your next home without the need for a mortgage. Being an all-cash buyer means you can bypass concerns about rising mortgage interest rates, giving you a competitive edge in a competitive market. As the National Association of Realtors (NAR) highlights, all-cash buyers are happily avoiding the higher mortgage interest rates.

Increase Your Down Payment: Your home equity can be used as a substantial down payment on your next property. In fact, it might be enough to enable you to make a more significant down payment, reducing the amount you need to borrow. This, in turn, could lead to lower interest rates for your mortgage, as Experian explains. A larger down payment lowers your loan-to-value ratio, potentially resulting in a more attractive interest rate offer from your lender.

In Conclusion

If you’re contemplating a move in Southern California, the equity you’ve built up in your current home can make a significant difference, especially in today’s real estate climate. To determine the exact amount of equity you have in your current house and explore how to leverage it for your next home purchase, don’t hesitate to reach out to a trusted real estate agent. They can provide valuable insights and guidance tailored to your specific situation. So, take advantage of the equity you’ve worked hard to accumulate and make informed decisions in today’s dynamic housing market.