IN TODAY’S WORLD OF REAL ESTATE, EQUITY IS FANTASY, NOT REALITY.

These days, you are more likely to see a unicorn than realize any previously held visions of equity in your real estate holdings. Home equity is the market value of a homeowner’s unencumbered interest in their real property—that is, the difference between the home’s fair market value and the outstanding balance of all liens on the property. The property’s equity increases as the debtor makes payments against the mortgage balance, and/or as the property value appreciates. In economics, home equity is sometimes called real property value.
Many homeowners are clinging to the fantasy that “equity” in their home will save them in times of financial hardship and applying for Home Equity Lines of Credit that will never materialize. The reality is that the current market value of the home is most likely less than what the homeowner owes on the home. The worst housing markets include Nevada, Arizona, Florida and California; in Nevada 70% of the homes are underwater with borrowers owing more than the current market value of the home. In Florida, things are not much brighter with 48% of homes “underwater”. One client I spoke with purchased a townhome in Miami for $375,000 in 2007. The current value today? Around $120,000 as the area is teeming with foreclosures and the unit across the street closed last month at $118,000.
CNNMONEY.COM Poll estimates that it will be 2015 before the typical homeowner who is now underwater will have some equity in his home. In the hardest hit housing markets it is projected that the rebound will not occur until the late 2020’s or early 2030’s. In the meantime, it’s time to get real and face the facts. Hand wringing and traveling down memory lane prior to the housing bust will only make a bad situation worse. I cannot stress the importance of the phrase “time is of the essence” for all Americans facing financial hardship. The fact is you can’t change this tough economy just as you can’t rely on a home equity loan to solve your current financial obligations. One of the things you can do is contact a licensed attorney or a legitimate non-profit consumer credit service such as NACA (National Association of Consumer Advocacy) to obtain guidance and advice on how to manage and settle your debt, develop a sound plan for the future and begin moving towards financial wellness.

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