If you held on to a property through the pandemic, you've probably gained a good amount of equity. In fact, according to the latest Homeowner Equity Insights report from CoreLogic, total homeowner equity jumped nearly 20% in the first quarter of the year, clocking in at a whopping $1.9 trillion.
"While the coronavirus pandemic created economic uncertainty for many, the continued acceleration in home prices over the last year has meant existing homeowners saw a notable boost in home equity," CoreLogic reported.
That boost was biggest in Idaho and California, which saw average home equity gains of nearly $71,000 and $70,000, respectively. The average homeowner nationwide saw a jump of $33,400 in equity year over year.
What increased equity means for you
With home prices skyrocketing, it's no wonder property owners are sitting on massive amounts of equity. According to CoreLogic, prices were up 11.4% over the year through March, giving the average homeowner with a mortgage a $216,000 increase in equity.
As a real estate investor, these equity jumps could mean several things.
Access to cash for that next investment
Tap that equity using a home equity loan, HELOC, or cash-out refinance, and use the cash as a down payment on your next property purchase. You could also use it to improve your existing properties and increase the rent or selling price accordingly.
A safety net when forbearance and foreclosure protections end
Foreclosure moratoriums and mortgage forbearance options won't last forever, so if you're struggling to make your mortgage, you'll need a plan. A good option? Lean into that equity. Sell the property and use it to pay off the loan and move forward. As Frank Martell, president and CEO of CoreLogic, put it, "Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic."
The report continued: "The accumulation of equity has become critically important to homeowners deciding on their post-forbearance options. In contrast to the financial crisis, when many borrowers were underwater, borrowers today who are behind on mortgage payments can tap into their equity and sell their home rather than lose it through foreclosure."
A bigger ROI if you sell
Finally, you can also simply capitalize on the hot market, sell your property, and let the equity increase your profits. Given the amount of bidding wars these days (nearly 3 out of every 4 buyers face one), you'll likely get a pretty hefty ROI once all is said and done.
The bottom line
Thanks to rising home prices, property owners are gaining serious equity these days. As an investor, that puts you in a prime position to either weather the storm or capitalize on the hot market. Which route will you take?