In real estate, equity refers to the difference between the market value of a property and the claims held against it (i.e. the mortgage).

Two factors are at work here, and both can be in your favor as a home owner.  The first is that the mortgage is reduced with every payment you make.  The longer you own the home, the more equity you will accumulate, up until the mortgage is paid off.

The second factor is that the property may appreciate while you own it.  Appreciation refers to the increase in the value of an asset, such as real estate.  Real estate typically appreciates over time due to inflation, supply and demand, capital improvements and other factors.  Understanding why real estate goes up in value can help you make more profitable investment decisions.

• Supply and demand can cause the value of real estate to go up or down.  Over supply can cause real estate values to fall and undersupply can cause prices to appreciate.

• Is the job base in your community growing or is it declining?  The availability of high paying jobs can greatly impact appreciation growth rates.

• Is the local economy expanding?  Changes in the infrastructure of an area can have a large impact on the demand for property.  Proximity to shopping centers, schools, hospitals, jobs, police and fire protection, public services, etc in most cases will increase the demand for real estate.

• Are mortgage rates increasing or decreasing?  The general level and the direction of interest rates can greatly affect the demand for real estate.  As mortgage rates increase, the demand for real estate decreases and vise versa.

• You can also take an active role and increase the value of real estate by making cost-effective improvements. 

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Park Forest Enterprises, Inc., Realtors^®

1000 W. Aaron Drive, State College, PA  16803, USA  

Phone:  (814) 238-3431  -  Fax:  (814) 238-4561

Park Forest Enterprises, Inc. is a licensed Real Estate brokerage in the State of Pennsylvania

Park Forest Enterprises, Inc. Real Estate License Number RB041395A

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