The Economic Perspective: “Home Equity and Business Starts”

I’m Mary Walden, with economist MW, welcoming you to the economic perspective.   Today’s program looks at home equity and business starts.  Mike, one of the aspects of our economy that we celebrate is the ability of people to start their own company.  Of course, a major challenge in doing this is acquiring the funds for the start-up.  How do homes and the wealth owners have accumulated in their homes fit in this process?

 

Mike:  Summary Answer

  1. Traditionally it’s been very important
  2. Wealth in an owner’s home is equal to the market value of the home minus the current value of the home
  3. So if home could sell for $100,000, and owner has a mortgage with a balance of $40,000, then equity (wealth) is $60,000
  4. Then, owner could convert some of that equity for cash and use in business start-up
  5. Research has shown home equity has been a key for small business start-ups
  6. And drop in home equity during the Great Recession was a blow to this
  7. Fortunately, things have improved since
  8. I’m MW

 

Mary:  And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics.