Is Home Equity Down?

For decades consumers have believed that owning your own home is the way to build independent wealth. The efforts of buying a home, remodeling to upgrade, and making timely mortgage payments was supposed to result in the eventual increase in home values and more financial gains for the homeowner in question. However, some may be scratching their heads out of confusion, because for the first time in decades, homeowners who have followed that script to a “T” actually have experienced the opposite in the form of declining home values. Now they are left wondering if the value of home equity is a myth.

Those who are concerned and plan to live in their home for the long run need will ultimately have their patience rewarded. Yes, there has been a declining spiral of home values and the American real estate market has yet to hit rock bottom. But once that happens (and it is looming on the horizon), the industry will now have the back bone and insight to rebound strongly.

Historically, the home values have kept pace with inflation, so that is sure to continue in the future. Additionally, home values have a direct correlation with personal income. Although at this time, when many jobs are unstable and many people are without income, the effect is negatively impacting home values, but this too shall pass. Even if unemployment hits the double digits, it will only be temporary and the employment sector will bounce back with new jobs and more personal income gains.

The late real estate boon was based on lax loan procedures and widely available credit. Since that is no longer readily available, that party is over. However, when the economy stabilizes, and it will, home values will continue on its traditional path of being an excellent investment for your financial security.