Husky Homes Blog

Simply put, your home equity is the calculation of your mortgages owed subtracted from the current value of your home. You can determine the approximate mortgage payoff amount yourself by reviewing the loan balance on your monthly mortgage statement(s), but it isn’t as straight-forward for you to determine the current market value of your property.

In today’s rapidly changing and complex real estate market, the current market value of your property may be different month over month, and if an appraisal were to be ordered to determine an exact value, it would only represent the snapshot in time that the report was created – an appraisal ordered a few weeks later may bring a different valuation due to subjectivity with other selected comparable sales from a different moment in time.

When you buy a home, your initial equity is determined by your down payment plus any positive difference between your purchase price and the appraised price. Every time you submit a monthly (or additional) principal payment to your loan, your equity increases. In markets like the greater Madison area, equity has also been increasing rapidly due to year over year population growth, low supply and high demand, pushing up home prices (and homeowner’s equity positions) in the residential market.

Due to the variability of housing prices at different times of year and in different supply/demand cycles, an approximate valuation for your home at any given time is usually appropriate. However, if a price determination is needed to sell a home on the open market, then supply and demand factors in with other market conditions including available inventory and other macro/microeconomic factors to determine the current valuation.

It is a real estate professional’s job to interpret the market to make a price recommendation, however, it is the market that determines the value.  Homeowners will often attempt to be savvy and follow their home’s valuation themselves on public sites such as Zillow and Realtor.com, but these are not precise estimates and instead reflect a very general approximation using only past sales in that local market or neighborhood to determine the current value, ignoring current market data, competition and present-day consumer spending habits.

If you are curious where you are sitting today with equity, and if you want to know how you can leverage equity to move-up, find an investment property, fund personal expenses, etc., the most accurate measurement would require a comparative market analysis from a real estate professional or having the home professionally appraised. The bottom line — your home is worth (and your equity position) is as much as someone is willing to pay for it based on the ever-changing and complex current market conditions.