Crucial Highlights
- Nearly every homeowner holds equity—a slice of the property they genuinely possess outright, free from debt or loans.
- As your mortgage shrinks, your equity share swells, and it can swell further when local market values or home upgrades bump up your property’s price tag.
- When your mortgage debt overshadows your home’s market worth, you’re in a negative equity spot—complicating efforts to sell, refinance, or tap into your home’s value.
Lately, the buzz around home equity isn’t without reason: it’s grown tremendously. Thanks to a pandemic-driven surge in housing prices, many homeowners saw their ownership stakes balloon substantially.
Collectively, U.S. household equity stands near an all-time peak at $34.5 trillion. On average, mortgage holders boast around $302,000 in equity, based on data from property analytics firm Cotality.
Let’s peel back the layers of home equity numbers and explore why they matter so much for anyone with a stake in a home.
Breaking Down Home Equity Jargon
Home Equity
This is the gap between your property’s market value and the remaining balance on your mortgage. For instance, if your home’s worth sits at $500,000 and you owe $100,000, your equity stands at $400,000.
Home Equity Loan
A lump-sum, usually fixed-interest loan secured by your house—often dubbed a second mortgage. While criteria differ across lenders, you typically can borrow up to 85% of your home’s total value (including what you still owe on your first mortgage).
Home Equity Line of Credit (HELOC)
This borrowing route taps your property’s value but offers flexible, revolving credit — think credit card style — that you draw from as needed, with variable interest rates shifting over time.
Negative Equity
When your mortgage debt eclipses your home’s current market price, you’re underwater. Say your home’s fair market value is $300,000 but you owe $310,000; you’re facing negative equity.
Snapshot of Current Homeowner Equity Metrics
Note: Unless specifically mentioned, stats refer to Q1 2025.
- Almost half (46.2%) of mortgaged homes qualify as “equity rich,” meaning their loan balance is less than half their market value.
- From the average $302,000 equity among mortgage holders, approximately $195,000 is “tappable”—withdrawable while maintaining at least 20% ownership.
- After a slowdown in home price hikes over the past year, homeowners lost roughly $4,200 in equity on average between Q1 2024 and Q1 2025.
- Northeastern owners enjoyed the heftiest equity gains year-over-year: Rhode Island (+$37K), New Jersey (+$36K), and Maine (+$20K).
- In contrast, Western states faced steeper equity declines: Hawaii (-$66K), Washington (-$12K), Arizona (-$14K).
- The total negative equity nationwide sums to $350 billion—an upswing of $26.6 billion in one year.
- Underwater properties compose just 2.1% of mortgaged homes.
- Home equity borrowing surged to heights unseen since early 2008: Q4 2024 saw home equity loans jump 13%, with HELOC originations climbing 8%.
- HELOC balances swelled by 7.2% throughout 2024.
Why Should You Care About Home Equity?
If you’ve fully paid off your mortgage, congrats—you own 100% of your home’s equity. But if you started with just a 20% down payment, your equity stake began at that fraction.
Your current equity is the difference between what your home’s worth and the remaining mortgage balance. For example, owing $50,000 on a $300,000 home means you roughly hold $250,000 in equity.
Smart Ways to Leverage Your Equity
Tools like home equity loans or HELOCs let you tap into this value to cover big-ticket expenses, often at much friendlier rates than credit cards or personal loans—popular for renovations, big repairs, or other substantial investments.
Tracking Home Equity Trends Over Five Years
In May 2025, the national median home price soared beyond $420,000, up from just above $280,000 in May 2020, per National Association of REALTORS data.
Such steep price appreciates naturally swell home equity stakes. As home prices inflated by roughly 50%, tappable equity—the portion homeowners can borrow against while preserving at least 20% ownership—ballooned by an eye-popping $5.7 trillion, essentially doubling. The average tappable equity per homeowner added nearly $102,000, reveals the ICE 2025 Borrower Insights Survey.
Certain states showcased pronounced equity growth as of Q1 2025, based on Cotality’s research:
- Rhode Island: +$37,000
- New Jersey: +$36,000
- Massachusetts: +$23,000
- Maine: +$20,000
- Connecticut: +$35,000
- District of Columbia: +$30,000
With equity climbing steadily across 90% of major metro areas over the past half-decade, the average American homeowner’s wealth swelled by nearly $150,000, according to NAR. Even as home price growth has recently moderated, equity remains an invaluable asset for property holders.
What Fuels Home Equity Growth?
- Mortgage Payments – Early on, a larger chunk of your payment tackles interest, but gradually the balance tips toward principal repayment. That principal portion directly boosts your equity.
- Extra Principal Contributions – Any additional payments beyond your scheduled mortgage installments accelerate equity building.
- Market Appreciation – Shifts in your local real estate scene can amplify home values without you lifting a finger. Neighborhood popularity surges, urban renewal, or infrastructure improvements often push prices higher, fattening your equity.
Understanding Negative Equity
Negative equity, or being “underwater,” means you owe more on your mortgage than your home is worth. This tricky state blocks you from easily refinancing or grabbing loans against your property since lenders want assurance you have skin in the game.
Only a small sliver of properties—just over 2%—are underwater, but the trend has inched upward since 2024.
By the Numbers
| Number of underwater U.S. homes | 1.2 million | +17% |
Concluding Thoughts on Home Equity
Grasping the ins and outs of home equity is a must for anyone holding property. This financial reservoir not only cements homeownership’s allure but also stands as a tangible asset that can be leveraged, saved, or invested over time.
Your stake in your home is more than bricks and mortar—it’s a cornerstone of wealth-building and financial flexibility within the American Dream.
