Home equity rises for first time since recession


After years of doom and gloom on the housing front, Americans are seeing a big rise in the equity in their homes.

New numbers from the Federal Reserve show the average equity of the average American homeowner now stands at 41 cents on the dollar — the highest it’s been since 2008. Putting real numbers to that stat, you would have $82,000 in equity in you owned a $200,000 house, in just one example.

This latest stat about the increased equity is in spite of the fact that one in four people are upside down in their home mortgages.

What exactly is going on to raise our national equity? Two things.

First, people are paying down their mortgages by big amounts so they can refinance at historic low interest rates. Second, they’re picking 15-year loans, which mean higher monthly mortgage payments now, but the debt will get paid off twice as fast versus a traditional 30-year loan.

Both factors are good news for people as they try to right the financial ships. The amount of equity people have will continue to rise and rise over time.

The events of the last few years have taught people a lesson that will stay with them for a long time, if not for a lifetime. So it sets the table for significant improvement in household net worth going forward.

Meanwhile, the fiscal cliff deal has extended the tax holiday on foreclosures, short sales, and deed in liues through 2013.

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