Home Equity Decreases Nationally To End 2025

U.S. homeowners lost some equity over the past year as home price growth slowed, though overall equity levels remain historically high.

A new report from Cotality found that borrower equity declined by $78.8 billion in the fourth quarter of 2025 compared with a year earlier — a drop of about 0.5%.

On average homeowners lost roughly $8,500 in equity between the fourth quarter of 2024 and the same period in 2025.

Despite the decline, the average homeowner with a mortgage still holds about $295,000 in equity.

Data shows that total homeowner equity among borrowers with mortgages stood at roughly $17 trillion during the third quarter of 2025.

The report indicates that equity losses slowed somewhat compared with the previous quarter. In the third quarter of 2025, the average homeowner lost about $13,300 in equity year-over-year.

“As home price growth has slowed, homeowner equity has largely leveled off, but it remains historically high,” said Cotality Chief Economist Selma Hepp. “Existing mortgage borrowers still control nearly $17 trillion in total equity, with roughly $11 trillion that could be tapped, and those figures have held remarkably steady over the past year.

“And while borrowers have been relatively timid in tapping the equity, declining borrowing rates could make tapping home equity relatively more affordable in the future.”

While overall equity remains strong, some homeowners have begun to fall into negative equity as prices soften in certain markets.

Negative equity increased 15% year over year to about 1.1 million homes — representing roughly 2% of all mortgaged properties. The number of homes with negative equity rose 3.6% quarterly to about 1.2 million properties — or 2.2% of mortgaged homes nationwide.

Combined value of negative equity reached approximately $366 billion by the end of the fourth quarter — an increase of $3.3 billion from the previous quarter and $24.2 billion from the same period a year earlier.

Housing markets show regional divide

Home equity gains and losses varied widely across states.

Several states in the Northeast posted the largest year over year gains. According to the report the biggest increases occurred in New Jersey where homeowners gained an average of $26,100 in equity followed by Wyoming with $23,100 and Connecticut with $20,300.

Illinois and Rhode Island also recorded gains.

By contrast, homeowners in some of the largest housing markets experienced declines. Florida recorded the largest average drop at $29,400 followed by California at $24,700 and Arizona at $23,900.

In total, 17 states posted equity gains while 28 states recorded losses.

The report also examined major metropolitan areas and found that several large cities including New York Chicago and San Francisco had relatively low shares of negative equity.

Other markets saw larger increases in negative equity, including Denver, Houston, Los Angeles and Las Vegas.

Risks tied to price movements

Changes in home prices could shift the number of homeowners with negative equity in either direction, Cotality added.

According to the report, about 185,000 homes currently in negative equity would regain positive equity if home prices increased by 5%. At the same time, roughly 372,000 additional homes would fall into negative equity if prices dropped by 5%.

Loan-to-value ratios also moved slightly higher over the past year as equity levels declined.

The average loan-to-value ratio increased from 44.8% to 45.4% with a growing share of borrowers holding loans between 85% and 94% of their home’s value.

“Looking ahead, muted home price appreciation could limit additional equity gains, and any deterioration in the labor market could pressure household balance sheets — particularly for more recent buyers with thinner equity cushions,” said Hepp.

Cotality said its Home Price Index forecast currently projects home prices will rise about 4.46% by December.

The company plans to release its next homeowner equity report on June 11 with first-quarter 2026 data.