Real estate lost a lot of value during the recession but most areas have
rebounded considerably. In some cases, the homes are worth more than they
were before the housing bubble burst.
The dynamics are classic for this type of market: inventories are low,
mortgage rates are low and demand is high. All price ranges are on the
rise with some at an even higher rate because the short supply is causing
competition among buyers.
Another reason many homeowners’ may have more equity is simply not staying
current with what is going on in the market. In a recent FNMA study, it
indicates that 23% of owners believe they have negative equity in their home
when actually, it is 9%. 37% believe they have greater than 20% equity in
their home when actually 69% of homeowners do.
Even if you’re not planning to sell your home, knowing the value helps you
understand your financial position better. The interest on home equity debt up to a
$100,000 limit is tax deductible and can be used for any purpose. Owner’s
commonly refinance to eliminate mortgage insurance, consolidate mortgages, pay
off higher interest rate debt like credit cards or student loans or to buy out
an ex-spouse’s equity.
Be aware that an automated value model like Zillow Zestimates uses algorithms
to determine a price and while it might be in the ballpark, AVM results may only
be accurate about 20% of the time. A comparable marketing analysis or
broker’s price opinion will be more accurate due the subjective approach that
will be used by an agent with personal experience in the area. An agent
will consider factors like condition, floorplan, marketability and demand.