The Average Colorado Homeowner Gained $78,000 in Equity over the Past Year
The Average Colorado Homeowner Gained $78,000 in Equity over the Past Year
Last year, through Sept. 30, Colorado homeowners amassed an average of $78,000 in home equity. This increase is up from a $77,000 annual gain in the second quarter and a $47,000 annual gain in the first. The significant jump in home values across Colorado is translating into these remarkable gains in homeowner equity, and that added wealth could fuel additional spending in the months ahead.
Colorado’s gains weren’t even the highest in the region. Several states with lower median home prices outperformed, including Arizona, up to $92,000; Utah, up to $91,000; and Idaho up $82.000. Nationally, homeowner equity rose 31.1% year-over-year in the third quarter, creating $3.2 trillion in additional wealth.
Approximately 63% of U.S. homes carry a mortgage, and equity gains include the paying down of principal. However, current gains are being driven predominantly by record-setting increases in home values across the country.
A big plus of higher home prices is that a decreasing number of borrowers are underwater. This provides borrowers who fell behind on their payments during the pandemic a better chance of avoiding foreclosure.
Tapping equity can also help fund home improvements, cover the cost of college education for children, and support higher-cost purchases. Even if it isn’t accessed, just knowing the equity is there can contribute to a greater willingness to spend, what economists call the “wealth effect."
On the downside, higher home values are widening the economic gap between those who own a home and those who do not, which could contribute to a more divided society, said Lawrence Yun, chief economist at the National Association of Realtors.
“My concern is really about what will happen to first-time homebuyers. Can they reach the market?” asked Yun, who was also speaking at NAREE.
Bottom Line
As we look at the forecast for prices, interest rates, inventory, and home sales, we can remain optimistic about what's on the horizon for 2022. Let's connect today to discuss how we can navigate the market together in the coming months.