Home Equity Surge: An Opportunity for Homeowners

American homeowners have seen a remarkable increase in their home equity, accumulating hundreds of thousands of dollars that they are increasingly leveraging, even amidst the backdrop of high interest rates. Home equity, which is calculated as the difference between the current market value of a home and the outstanding balance on the mortgage, has experienced significant growth as home prices continue to rise. According to CoreLogic, a reputable property data firm, homeowners with mortgages now possess an average of approximately $315,000 in home equity—an increase of nearly $129,000 since the onset of the coronavirus pandemic in 2020.

“Homeowners are sitting on a mountain of equity,” stated Greg McBride, the chief financial analyst at Bankrate, highlighting the substantial financial resource available to homeowners today. The trend of borrowing against this equity is evident in the rising balances of home equity lines of credit, or HELOCs. These second mortgages allow homeowners to tap into their equity as collateral, and recent analysis from the Federal Reserve Bank of New York indicates that HELOC balances have surged by 20 percent since 2021.

Additionally, a report by CoreLogic revealed that home equity loans—second mortgages characterized by fixed interest rates and consistent monthly payments—have seen a significant increase in the first half of this year. This rise could be attributed to the fact that average rates for these loans have been more favorable compared to those on lines of credit.

In a report published in September, Selma Hepp, the chief economist at CoreLogic, noted that the increase in home equity has provided homeowners with a critical financial buffer during uncertain economic times. This financial cushion allows homeowners not only to manage their current expenses but also to invest in future opportunities.