Homeowners are sitting on record equity

Key Points:

• U.S. homeowners collectively hold $11.5 trillion in tappable home equity as of Q2 2024, but are using less than 0.1% of this potential borrowing capacity despite a 20% increase in second mortgages and HELOCs.
• Many homeowners with significant equity are reluctant to tap into it due to low mortgage rates secured during the pandemic, strong cash flow, and economic uncertainty, making higher-rate second loans unattractive.
• Home equity levels vary widely by region, with the highest averages in the West and Northeast, such as Hawaii and California, while states like Louisiana and Iowa have much lower equity; these disparities are growing due to uneven home price appreciation.
• Some states, including Texas, Minnesota, Colorado, and Maryland, are experiencing declines in home values, leading to reduced equity, though the overall share of underwater mortgages remains low at 2.1%.
• Despite record-high housing wealth, homeowners are largely keeping their equity intact, benefiting from continued home price gains and cautious borrowing behavior amid rising interest rates and economic concerns.