The equity in your home is the difference between what you sell it for and how much you owe on it. Homeowners gain equity through price appreciation and paying down their mortgage debt.
The postwar Baby Boomers gained equity primarily through home price appreciation, actually creating their own demand. Those who remained in their homes a long time saw equity buildup from paying down their mortgages.
For the many new buyers using low down payment programs such as the FHA 3.5% down program, building equity is challenging. The day they close on their new home, they're probably ten percent or more underwater. If they had to sell, the price would be the same as they paid, at best, but their closing costs at purchase time and selling costs at sale time would overwhelm their equity--the 3.5% down payment--and then some.
This space has written previously on the true cost of home buying, and it's worth a re-read now and then. One of the takeaways is that equity isn't investment income or "profit." The true cost of a home is the base price, all the remodeling and repairs, the points and other costs associated with the initial mortgage, refinances, home equity loans, and the like. These don't get deducted in the equity calculation, but they're very real costs.
One way to build equity more quickly is to make additional principal payments. Some lenders offer a program where the borrower makes two mortgage payments a month, each of them half the normal monthly payment, which pays down the principal a bit more quickly. Another way (and one I think is better) is to pay more than your payment, if you can, because the extra amount will pay down principal.
For example, with a $200,000 mortgage at 5%, about $240 of the nearly $1,070 monthly payment is applied to principal for the first ten years. The rest is interest (taxes and insurance aren't in this calculation), which is why you'll pay about $386,000 over the entire thirty years. If you paid an extra $100 per month and apply it to principal, you'd be adding 70% more to principal payoff and gaining quicker equity buildup.
These are rough calculations, of course, but they make the point. Talk to your lender or financial adviser to see what works for you.
As always, if you have any questions, just ask. The Captain is always here!