Washington State Real Estate Practice Exam

What can influence the equity in a home over time?

1. The local market conditions

2. The age of the homeowner

3. The number of rooms in the house

4. The landscaping of the property

The correct answer is: The local market conditions

The local market conditions significantly influence a homeowner's equity over time because equity is determined by the difference between the market value of the home and the outstanding mortgage balance. When local market conditions are strong, home prices typically rise due to demand for housing, leading to increased equity for homeowners. Conversely, if the market is weak, home prices may stagnate or decline, which can result in decreased equity. Factors such as the age of the homeowner, the number of rooms in the house, and the landscaping of the property can affect a home's appeal and desirability but are not direct factors in determining equity. While a larger home with attractive landscaping may sell for a higher price, this is dependent on the overall market trends. Ultimately, it is the broader market conditions that exert the most influence on home values and, consequently, on the equity a homeowner possesses.