The best thing about positive equity is that homeowners who have it are free to go shopping for a better home! Recent significant upticks in positive equity resulting from rising home values are helping millions of American homeowners. How is that affecting the market of homebuyers for our fix & flip properties?

As you know, millions of homeowners found themselves trapped with mortgage loans higher than the value of their homes during the real estate price tumble of 2007-2009. Loans that were still at 20% or less equity quickly went negative when the local market lost 30% and more of home values.

Currently, many American homeowners with improving financial circumstances are still anchored to an underwater mortgage loan. There is pent-up demand waiting for release, but it will remain under wraps until enough time passes for home values to rise while homeowners pay down their existing mortgages (years, perhaps). But an estimated $380+ billion in negative equity nationally is actually better than the $400 billion from a year ago.

What do those stats mean to us as real estate investors? The good news is that, nationally, positive market trends have increased the number of homeowners with 50% or more equity by about 10%. With housing values still below their 2006 levels in many markets, many of these homeowners see the value of using their equity to move from their current home for a better one.

Interestingly, the negative equity trend did not force people out of their homes, so long as they are able to continue making the payments. Foreclosures have more to do with owner’s personal financial situation that with their equity – job, wise budgeting, health issues and even personal events such as divorce or a legal entanglement. Homeowners can fall into foreclosure even with considerable equity and statistically many do, for a variety of reasons.

So, a rising market means that more foreclosures occur with positive equity when a property has significant defects a homeowner can’t afford to fix, and that scare away buyers. Those defects are the core of our business as wholesalers and flippers – we fix and flip! Landlords can also buy into equity, even after they bring the property up to rental standard.

If you are in one of the several markets with rising stats of positive equity, including Houston, Dallas, Anaheim, Portland and Seattle, this is great news for foreclosure investors! Find your below-market property purchases, cure the defects and prepare for positive results in a rising market!

What effect have housing values had on homeowner equity in your local market?

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