After years of rising home prices, housing wealth has hit a new peak. Cotality, a data technology firm, puts tappable equity at $11.5 trillion in the second quarter - the headroom owners could borrow against while still leaving enough in the house to satisfy lenders.
Altogether, mortgage borrowers have $17.9 trillion in equity. On average, that is $310,000 per homeowner, an increase of about $6,000 from three months earlier.
Borrowing nudged higher quarter over quarter, with homeowners taking out nearly 20% more second mortgages and HELOCs in Q2 than in Q1. Even so, those loans tapped under 0.1% of the aggregate tappable equity.
Thom Malone, principal economist at Cotality, said, "The borrowers with the most housing wealth are often the least likely to tap it." "They tend to have low mortgage rates, strong cash flow, and little reason to move." With home prices still seeing small gains in many areas, equity keeps building on its own. Meanwhile, nerves about the economy and higher interest costs make a fresh loan a tougher sell, since a second lien today would likely carry a much higher rate than the primary mortgage most owners already have.
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During the initial two years of the Covid pandemic, mortgage rates sank to all-time lows. If you purchased a home in that period or earlier, your mortgage rate is at least one third of today's. That lighter payment improves monthly cash flow, helping many households cover things like renovations or tuition without tapping home equity.
Homeowners in western and northeastern states hold the largest equity cushions. On average, homeowners hold over $600,000 in equity in Hawaii and California, and more than $400,000 in Massachusetts. In Louisiana, Oklahoma, and Iowa, averages sit just over $100,000. Those gaps are widening because price appreciation is stronger in markets that already had higher equity.
Not all states are gaining. Values have softened in places like Texas, Minnesota, as well as Colorado and Maryland, plus the District of Columbia, trimming equity there. Even so, the share of underwater mortgages - where the loan balance exceeds the home's value - remains low at 2.1%.
There is a hefty cushion of home equity out there, but with rates elevated and many owners locked into cheaper first mortgages, most are letting that wealth grow quietly rather than turning it into new debt. If prices keep inching up, that buffer could continue to build without lifting a finger.
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