"In This Economy?" Why Home Equity Still Wins

The economy can feel confusing. Headlines change daily, interest rates rise and fall, it’s hard to know what really matters, and keep from panicking. Try to keep your eye on the long term picture. 

One big idea to keep in mind: experts say interest rates follow 30 year cycles—about 30 years of growth and low rates, followed by 30 years of tightening and higher rates. (So if you're waiting for rates to fall, you'll be waiting (on average) about 28 more years- good luck!!)

Since the early 2000s, we’ve been in a long period of “easy money.” The Fed bailed out the tech stock market and repeatedly flooded the market with cash- 2008 housing crash, COVID. This made borrowing cheap and encouraged people to invest. The result? Prices of things like houses and stocks went way up.

If you look at U.S. home prices (adjusted for inflation), they stayed mostly flat from 1890 until 2000. Then they shot up. Even after the 2008 housing crash, prices recovered quickly and kept rising. But the era of easy money is ending. Interest rates are much higher now, and all the money added to the economy in recent years is causing inflation. It’s become harder to borrow, harder to save, and harder to build wealth. 

I've seen a few Tiktoks and read a few Editorials saying "The American Dream is Over." And I certainly wouldn't go that far, but it's clear that today’s financial landscape is more challenging than it used to be. It’s tough to make good money, harder to keep it, and even tougher to grow it. Job security is shaky, the stock market might stay flat for years, and prices on everyday items have gone way up (hello, eggs??) 

But its not all lost. Whats left? Getting house rich. 

Let’s say you buy a house for $700,000. Over 10–15 years, the value goes up to $1 million but now you only owe $350,000 on the loan. Congrats, you now have $650,000 in home equity.