Home equity

living room 01The Seattle Times had an interesting article regarding home equity building rapidly in our fast moving real estate market and investors using home equity to make more speculative investments:

According to Economy.com, Americans pulled out roughly $705 billion of equity from their homes last year, up from $266 billion in 1999.

The bulk of that money came from capital gains made by people selling houses, and these profits often are used to purchase another residence.

Many people also use some of the extracted cash to pay off credit-card debt, which is widely viewed as a sensible way to use equity. Another large chunk of the equity withdrawn goes into home improvements. Spending on such projects totaled $138.3 billion last year, up 38 percent from five years before, according to Harvard University’s Joint Center for Housing Studies.

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