Home equity growth is a major wealth creator in America and particularly in California. Recent reports show equity growth is high and will continue to rise in San Diego. This bodes well for homeowners, first-time homebuyers, and real estate investors.
What Are Equity-Rich Properties?
According to ATTOM Data Solutions, an “equity-rich” property generally has existing liens that are less than 50% of its expected market value. Put simply, if you owe less than 50% of your home’s market value, you have an “equity-rich property.” In all, approximately 14.5 million or 26.7% of mortgaged homes in America can be considered equity-rich properties, according to World Property Journal. And, many of them are located in two primary regions in the United States.
Where to Find Equity-Rich Homes
The highest density of equity-rich homes can be found on the East and West coasts of America. And, California tops the list. 42.8% of California homes meet the equity-rich standard. The next four states, according to World Property Journal, are:
- Hawaii (38.8%)
- New York (35.1%)
- Washington (35.4%)
- Vermont (39.2%)
States with the lowest percentage of equity-rich homes include Louisiana, Oklahoma, Illinois, Arkansas, and Alabama.
Equity-Rich Properties in San Diego and California
In the 4th quarter of 2019, 11 of America’s top 25 equity-rich counties were located in California. And, the highest equity levels were found in the San Francisco Bay Area. Interestingly, Mountain View and Sunnyvale showed equity-rich ownership percentages of 80.1% and 79.5% respectively.
And, in 2018, San Diego ranked 7th (33%) on a list of top 10 equity-rich metros nationwide. San Diego’s 7th ranking speaks volumes about the state of its booming real estate market.
What are the Benefits of Equity-Rich Homeownership in San Diego?
There are many benefits to being an equity-rich homeowner. You potentially have more accrued wealth than the vast majority of Americans. That gives you a plethora of options:
- Having a low debt ratio reflects well on your credit score. This, in turn, makes you a high-demand client for lenders who are likely to offer you the lowest interest rates for loans. This would apply to buying a home, vehicle, boat, or other major purchase. An alternative, of course, is that you may also qualify for a HELOC, HELOAN, or another cash-out loan to pay for a major new acquisition. With some loans, you only have to service it until it’s time to repay the principal, thus enabling the maximum use of the freed-up equity.
- High home equity values may also be used to improve the property itself. Essentially, a home equity or HELOC loan can be used to renovate kitchens and bathroom spaces to increase a property’s value, adding to your personal wealth. The same applies to the building of extra living spaces such as self-contained units or ADUs (accessory dwelling units). You may find 2020 the optimum year to make the most of?California’s new ADU Laws.
Many San Diego homeowners also become real estate investors. For hIgh-equity rental properties, the rental revenues alone may be sufficient to:
- Cover all operating costs
- Generate a monthly profit and,
- As property values rise, auto-generate increasing equity.
As a high-equity property owner, you have more disposable income. This may allow you to enjoy a more luxurious lifestyle. It may also allow you to help your children and grandchildren with college costs or a first-time home purchase.
Another advantage of equity-rich homeownership is that many of your neighbors will also be benefitting from San Diego’s real estate market. A community with a stable population is likely to see more improvements to surrounding properties. And, evidence points to the building of more ADUs (accessory dwelling units) in San Diego and California in 2020. In fact, architect firms have already begun converting unused garage spaces to gorgeous apartment homes. This can only mean two things:
- Homeownership will be accessible to more of San Diego’s population
- Home values (and prices) could rise even more quickly
San Diego Housing Forecast
Incomes in San Diego County are continuing to rise. According to the San Diego Union-Tribune, the city’s real estate market is slated to be California’s hottest in 2020. Although property values will rise more slowly than in previous years, the continued upward trend is a positive development and will generate even more equity value.
According to a 2019 report by NORADA Real Estate Investments, San Diego has one of the best track records in the nation for long term real estate investment. The report rates our real estate market in the top 10 in America, partly because of our track record and because rents are predicted to rise 8.4% this year.
While some forecasts set 2020’s market valuation a little lower, NORADA estimates it at 4% – 5%. The report maintains that this is partly because San Diego is more affordable than California cities like Los Angeles.
Invest in Equity-Rich Properties in San Diego
All things considered, the San Diego real estate market has a very high proportion of equity-rich property owners. In addition, Incomes, rents, and property values are all forecast to rise in 2020.
Still, selecting the right neighborhood, property type, and price range to satisfy specific goals is a major undertaking. And, success demands experience, knowledge, access to and understanding of the latest market statistics and forecast reports. If you’d like to learn more about buying a home in the red-hot San Diego market,?please click here to contact me now.