American homeowners saw their equity dip by an average of $9,200 over the past year as rising interest rates cooled the housing market, but experts say the decline is more of a reset than a collapse.
Homeowner Equity Falls $141 Billion Amid Rising Rates
Home equity, the difference between what a homeowner owes and what their property is worth, fell 0.8% year-over-year to $17.5 trillion in the second quarter, according to housing data firm Cotality, as reported by The Fortune.
The number of homes with negative equity rose 18% to 1.15 million.
"Home equity growth has shifted from a period of explosive gains in the years surrounding 2022, into a plateau," said Leo Pond, a real estate advisor with Four Seasons Sotheby's International Realty.
He added, "This isn't a collapse, but it is a market digesting several years of unsustainable growth. It is a long-term market correction."
Most Homeowners Still Hold Record-High Equity
Still, most homeowners remain well-positioned. The average American borrower holds about $307,000 in equity, the third-highest level on record, Cotality Chief Economist Selma Hepp said.
Even in markets hit hardest, such as Washington, D.C., and Florida—where equity fell $34,000 and $32,000, respectively—owners still retain six-figure cushions.
"Not to sound dismissive of $9,200, money is money," said Jules Garcia, a real estate agent with Coldwell Banker Warburg.
"But when compared to the six-figure equity many homeowners still hold, $9,200 doesn't seem as dire."
See Also: Bond ETF Investors On Alert During Fed Shake-Up, Rising Yields
Home Prices Fall Behind Inflation, Raising Affordability Concerns
Last month, the U.S. housing market slowed as home prices fell behind inflation, making ownership less affordable despite values remaining near record highs.
A Fortune report highlighted the market's weakening ability to generate wealth, with prices slipping under the pressure of tariffs and elevated inflation.
Nicholas Godec of S&P Dow Jones Indices noted that for the first time in years, housing costs were failing to keep pace with broader inflation.
The Case-Shiller index showed a 0.3% monthly decline in June, the fourth consecutive drop, while annual growth slowed to 2.1% compared to a 2.7% rise in consumer prices.
Earlier this month, economist Peter Schiff criticized mortgage giants Fannie Mae and Freddie Mac, arguing that instead of making housing more affordable, they inflated demand, pushed prices higher, and forced buyers into heavier debt.
Schiff warned this dynamic had turned the "American Dream" into a debt trap for many Americans.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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