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Greater equity means increase in trade-up homebuyers

Posted on Friday, September 13, 2013 at 11:33:10 AM

The options for homeowners are mounting. Rising home equity means greater value, opening up opportunities to buy or sell and move into bigger, better houses.

Residential financing is improving as less borrowers are now underwater on their current mortgages. Foreclosure rates are also dropping, according to mortgage technology firm FNC. The reason centers around home prices and equity - signaling a return of trade-up buyers, or those who now can afford to take a step up in real estate.

"We've seen hard data from the past 18 months that shows rising home prices and a foreclosure market with diminished impact due to decreasing foreclosure inventories and fewer new foreclosure filings," said Yanling Mayer, the director of research for FNC. "Meanwhile, a very encouraging trend that has been developing is the rising participation of trade-up buyers who are seeing improving home equity position and positive capital appreciation on existing homes."

Foreclosure sales only accounted for slightly more than 12 percent of total sales, instead of the 17.3 percent reported a year ago, per the FNC data.

Homeowners who are looking to take advantage of affordable residential financing and trade up should consider market conditions first, according to Realtor.com. For example, a hot market means it could be easier to sell rather than buy, while a cold one works the other way around. Home prices are a strong indicator of the current climate.