While U.S. Homeowners Hold Record Equity, They’re Not Leveraging It

American homeowners currently possess unprecedented levels of housing wealth, driven by substantial appreciation in home values throughout recent years. Nevertheless, they are utilizing only a modest portion of this accumulated wealth, according to a recent CNBC report.

During the second quarter of the current year, homeowners collectively maintained $11.5 trillion in accessible home equity, as reported by Cotality, a data technology firm specializing in analytics. This figure represents the maximum amount that borrowers could obtain through debt financing while maintaining sufficient equity to meet lender requirements. The aggregate equity held by mortgaged homeowners totals $17.9 trillion, averaging $310,000 per homeowner—an increase of $6,000 compared to the preceding quarter.

Although homeowners initiated approximately 20% more second mortgages and home equity lines of credit (HELOCs) relative to the first quarter, this activity still constituted less than 0.1% of the total accessible equity available for utilization.

“The borrowers with the most housing wealth are often the least likely to tap it,” said Thom Malone, principal economist at Cotality. “They tend to have low mortgage rates, strong cash flow, and little reason to move.”

Consequently, substantial capital remains uninvested on the sidelines and continues to appreciate, as residential property values across most regions of the nation are experiencing modest increases. Consumers are simultaneously growing apprehensive regarding economic conditions and escalating interest rates. Obtaining a secondary mortgage would necessitate borrowing at a considerably elevated rate compared to their primary mortgage terms, a proposition most homeowners will not pursue except in circumstances of absolute necessity.

Mortgage rates declined to historic lows throughout the initial two years of the Covid pandemic, meaning homeowners who acquired properties during or preceding that period maintain rates substantially lower—approximately one-third of current rates. These reduced monthly obligations provide homeowners with significantly improved cash flow, enabling them to finance undertakings such as home improvements or educational expenses without accessing their home equity.

Real estate markets are fundamentally regional in nature, with considerable disparities in equity accumulation, particularly pronounced in the Western and Northeastern regions. Average homeowner equity in Hawaii and California exceeded $600,000, while Massachusetts demonstrated equity levels surpassing $400,000. Conversely, Louisiana, Oklahoma, and Iowa exhibited equity levels marginally exceeding $100,000. These disparities are not merely substantial but are progressively expanding, as property value appreciation remains more robust in markets with already elevated equity levels.

Overall, although homeowners in the majority of states have accumulated equity, certain states are experiencing property value depreciation and consequently equity erosion. These jurisdictions include Texas, Minnesota, Colorado, Maryland, and the District of Columbia. The proportion of borrowers maintaining mortgage obligations exceeding their property values—referred to as underwater mortgages—remains relatively modest at 2.1%.