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Home Equity – Is It Time To Cash Out And Move?
By: Charles Essmeier
During the last five years, home prices have increased nationwide. In some parts
of the country, notably California, home prices have doubled or even tripled.
The median price of a home in the Los Angeles area is now nearly $450,000 and in
the San Francisco area, the price is approaching $600,000. As the economy
continues to improve, the price of housing continues to rise in California and
elsewhere. Many people who have owned their homes for more than three years are
suddenly finding themselves with hundreds of thousands of dollars in equity. Of
course, equity is only a theoretical gain, and if the price of housing goes
down, equity can go away. You only get to keep your equity as cash if you sell
your home. Many homeowners are doing just that.
Home equity loans are increasingly popular these days, and many people with
large amounts of equity in their homes are borrowing against it and using the
money for home improvements, dream vacations or other luxury items. Others are
simply cashing out and moving elsewhere. While prices on both coasts are rising
at a breathtaking rate, price increases in most of the country are still more
modest. A homeowner in California who bought a home five years ago for $200,000
may have a home worth $500,000 today. If that homeowner were to sell that home
and move to Texas, or Iowa or even parts of Florida, he or she could buy a
comparable or even larger home, pay cash, and probably keep a healthy profit to
invest. For most Americans, the equity in their home is their single largest
asset. Examining that equity to see if it can be used more wisely would be a
sound move, particularly as real estate experts warn of a housing “bubble” that
may soon reduce prices to more realistic levels. Should this “correction” in the
market take place, homeowner equity could be seriously reduced.
Obviously, selling a home and moving just to pocket the equity is not something
that suits everyone. While it may make sense from a financial standpoint, it
will mean finding a new employer, finding a new home, finding new friends and
moving children to new schools and friends. Anyone considering such a move would
be well advised to carefully consider all of the ramifications of simply picking
up and moving. On the other hand, the opportunity to extract several hundred
thousand dollars in cash from a home is a rare one, and investing it wisely
could go a long way towards financing a better lifestyle or a more comfortable
retirement. Homeowners should be aware that there might be capital gains taxes
to be paid on the sale of a home. Those considering selling their home to
extract their equity would probably benefit from a consultation with a financial
advisor.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com,
a Website devoted to debt consolidation information and http://www.HomeEquityHelp.net,
a site devoted to information on home equity loans.
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