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The term home equity refers to the monetary amount between the estimated market value of a home and the amount that is owed on the mortgage, if any. Ideally, the market value of the home will keep rising as the monthly payments on the mortgage will reduce the amount of the loan.
Home equity rates sometimes do not continue rising as they are expected to. Local, regional, and national economic and political conditions could all have a negative effect on home equity rates. Overbuilding in some areas could result in too many homes on the market within a narrow price range, causing home equity to stay stagnant over even decline.
Areas of high unemployment will have higher foreclosure rates, plus causing many homes to remain unsold for a long time. Where employment is dominated by a single industry or large employer, home equity rates are particularly vulnerable.
Some areas with a high income population and a diversified economy, plus many educational institutions may see consistent home equity growth, as there may be more buyers than sellers and desirable homes will continue to rise in value.