Home equity dips $78.8B as appreciation weakens

As home price appreciation continues to slow, home equity decreased again in the fourth quarter, completing a full year of annual declines.

Borrower equity fell $78.8 billion, or 0.5%, year over year, according to Cotality's Home Equity Report for the fourth quarter of 2025. That was an average decrease of $8,500 per borrower, less than the $13,300 lost the prior quarter. The average borrower had about $295,000 in accumulated equity, down from $299,000 in the third quarter.

"As home price growth has slowed, homeowner equity has largely leveled off, but it remains historically high," Cotality Chief Economist Selma Hepp said in a press release Friday.

"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."

The 30-year fixed rate mortgage dropped below 6% at the end of February for the first time since 2022, but it has since climbed back up to 6.11% in light of the Iran war, according to Freddie Mac.

Home-price growth was particularly muted in the fourth quarter last year, as October, November and December saw annual gains of 1.4%, 1.4% and 1.3%, respectively, according to the S&P Cotality Case-Shiller home price index. But falling home prices in some markets also meant some recent buyers found themselves in negative equity, the report said.

"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," Hepp said.

Negative equity rose 15% year over year to 1.1 million homes, or 2% of all mortgaged properties. Compared with the third quarter, negative equity properties increased 3.6%. Negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, Cotality reported.

The combined national value of negative equity was about $366 million in the fourth quarter, up $3.3 billion quarter over quarter and $24.2 billion year over year, the report found.

The Cotality Home Price Index predicted prices will increase 4.46% by December 2026. Its data showed 185,000 properties would gain equity if home prices increased 5%, but 372,000 would dip into negative equity if prices fell by 5%.

Regional comparisons

Twenty-eight states saw yearly declines in home equity, but strong positive and negative growth was scattered in markets across the country.

Equity gains were greatest in the Northeast again, as New Jersey, Connecticut and Rhode Island each cracked the top five, joined by Wyoming and Illinois. The three states with the largest declines in equity were Florida, California and Arizona, all more than $23,000.

At the metropolitan level, Denver, Houston, Los Angeles and Las Vegas saw the largest increases in negative equity among the 10 biggest cities in the country by housing stock, while New York, San Francisco and Chicago each posted significant gains.