Home Equity Investments Become An Emerging Asset Class As U.S. Market Value Surpasses $32 Trillion

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While most people are familiar with the concept of using home equity to finance home improvements or consolidate debt, few are aware of the growing trend of home equity investments (HEIs) as an emerging asset class. According to data from the St. Louis Fed, the total value of the U.S. home equity market is now $32.6 trillion, and HEIs are poised to become a significant player in the real estate investment landscape.

Home equity investments allow retail investors to access a homeowner’s equity in exchange for a stake in the home’s future appreciation. Unlike traditional mortgage debt, HEIs are all about equity—the foundation of real estate wealth. These investments generate returns in two ways: through increases in property values and payoffs generated from a home sale or refinance.

Home equity investment agreements provide homeowners with access to cash from their equity without the burden of added debt or monthly payments. At the same time, they deliver highly accelerated and downside-protected assets to investors. This emerging asset type has seen only a handful of originators operating within the $30+ trillion home equity market, with most dealing exclusively with private institutions.

However, Nada, a real estate investment platform, is changing the game by making home equity investments accessible to individual investors and smaller firms through its Cityfunds investment product with a minimum investment as low as $500. Nada’s wholly-owned subsidiary, Nada Loans, LLC, sources and originates home equity investment agreements through its in-house licensed mortgage brokerage origination and underwriting team.

The potential for home equity investments is particularly compelling during periods of high interest rates. As traditional investments like bonds and stocks become more volatile, HEIs, being tied to real estate, offer stability and diversification. 

These agreements often come with built-in risk mitigation features, such as investors sharing in a portion of the home’s appreciation rather than its absolute value, limiting potential losses.

As interest rates eventually decrease and the housing market continues to grow, home equity investments allow investors to benefit directly. The flexible terms of these agreements also provide advantages for both homeowners and investors as market conditions change.

Furthermore, home equity investments offer a low correlation with other asset classes, providing valuable diversification benefits and reducing overall portfolio risk.

With nearly $1 billion in unrated securitizations over the past two years and another $528 million in rated securitizations with the rating agency DBRS Morningstar, home equity investment agreements have proven to be an established and institutional-grade asset, similar to mortgage debt market products.

As the U.S. home equity market continues to grow and more investors become aware of the potential benefits of HEIs, this emerging asset class is likely to play an increasingly significant role in more portfolios. Investment products like Cityfunds, which make these assets accessible to a wider range of investors, are at the forefront of this exciting new trend.

Own a piece of the fastest-growing cities in the country through Cityfunds, the first investment products to provide both accredited and non-accredited investors with a way to own a part of the $32.6T home equity market for a single city. Get started today with as little as $500.

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