“This isn’t a collapse, but it is a market digesting several years of unsustainable growth,” he said. “It is a long-term market correction.”
Still, the average U.S. homeowner still has about $307,000 in accumulated home equity, according to Cotality. That’s the third-highest figure on record, according to Cotality Chief Economist Selma Hepp.
“Even in markets where recent price declines have pulled down average equity, such as the District of Columbia and Florida, borrowers on average hold almost $350,000 and $290,000 in equity, respectively,” Selma said in a statement. Home prices in Washington, D.C. and Florida dropped the most, down $34,000 and $32,000, respectively.
“Despite that being a concerning number, it’s not a panic level just yet,” Garcia said. “It’s a big warning sign, but there are still many local markets showing stability.”
To put it in perspective, many homeowners added gobs of money to their home equity during the pandemic.
“Many households added far more than during the pandemic, so this adjustment is a moderate correction rather than a crisis,” Pond said. “For the majority of owners with healthy loan-to-value ratios, this is a small haircut on top of a very full head of hair.”
Still, it’s always important to continue to follow home appreciation—especially in the case the homeowner is looking to sell.
“Home prices this year have experienced the slowest rate of growth since the Great Financial Crisis of 2008. As appreciation remains modest and even declines in some markets, home equity accumulation is projected to follow suit,” Hepp said. “With the reduced pace of appreciation, seasonal fluctuations in home prices will have a pronounced impact on equity changes.”
