Is home equity fake wealth? In Colorado Springs, where home values have surged 20-30% since 2020 due to low inventory and high demand, this question is more relevant than ever. Home equity—the difference between your home’s market value and mortgage balance—feels real when prices rise, but is it truly accessible wealth or an illusion? Understanding this helps buyers and sellers make informed decisions in our dynamic market.
What is Home Equity and How It Builds. Home equity accumulates through mortgage payments and appreciation. In Colorado Springs, median prices hit $441,000 in 2025 (per Pikes Peak MLS), building equity for owners. However, as argued in financial analyses, rising values from undersupply (our inventory at 1.8 months) create paper gains that may not translate to real spending power without selling.
The Case for Home Equity as Fake Wealth. Critics like Kevin Erdmann note that appreciation often stems from housing shortages, not true economic growth. In Colorado Springs, if your $400,000 home appreciates to $500,000, upgrading locally means facing similar hikes—netting little gain. Rents have risen 4x since 1984 nationally (flat relative to incomes lately), but home prices outpace wages, trapping owners in “lock-in” effects amid high rates (6-6.5%).
For in-depth analysis, read the original discussion at Of Dollars And Data: Is Home Equity Fake Wealth?
When Home Equity Becomes Real Wealth. Equity turns tangible through strategies like downsizing (e.g., from Northgate to Peyton for affordability), borrowing via HELOCs (rates ~8%), or selling to rent. In our market, military relocations near Fort Carson often unlock equity by moving out-of-state. Reverse mortgages offer options for retirees, though fees apply.
Colorado Springs Insights. Local equity averages $200,000+ per home, boosted by tourism and tech growth. But wildfire risks in areas like Black Forest can erode value via insurance hikes (up 10%). Beginners: Track equity with tools like Zillow Zestimates, but consult pros for accurate CMAs and to obtain help for a HELOC or a refinance quote.
Considering how equity fits your plans? Call, text, or visit thebaconpartners.com/contact for a free consultation.
Want tips on maximizing your home’s value? Check out my article here: How to Price Your Home to Sell in Colorado Springs.
I’m Andrew Bacon, a Top Colorado Springs Real Estate Broker in Colorado Springs. I take care of my clients as family and aim to provide them with the necessary information and tools to navigate the complex markets in Colorado and around the US.
As a member of the Pikes Peak & Denver Metro Association of Realtors, I enjoy staying aware of current cultural trends and economic drivers.Check back regularly for new articles on all things real estate along Colorado’s Front Range.
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