Homeowner equity levels declined in the third quarter as home price appreciation slowed around the U.S. and a growing number of cities experienced outright price declines.
Zillow reports that from June 2024 to June 2025, nine of the 10 most valuable housing markets in the U.S. — each with a valuation exceeding $1 trillion — combined for a net loss in home values measuring in the hundreds of billions of dollars.
A new report from the real estate analytics firm Cotality indicates that the average homeowner lost about $13,400 in equity over the year ending Sept. 30 — leaving typical homeowners with a mortgage with just under $300,000 in accumulated home equity.
Mortgaged homeowners shed nearly $374 billion in the third quarter, a decline of 2.1% year over year. At $17.1 trillion last quarter, net equity for homes with a mortgage are off their almost $17.7 trillion peak in the second quarter of 2024, according to Cotality.
“As the pace of home price growth slows and markets recalibrate from pandemic peaks, we’re seeing a clear shift in equity trends,” said Selma Hepp, chief economist of Cotality, in the firm’s latest Home Equity Report, released quarterly.
Shifting market dynamics since the COVID-19 pandemic have altered where gains and losses in housing wealth have emerged in 2025 — and should continue to emerge through 2026, with most housing forecasts showing 1% to 2% home price growth in upcoming years.
Despite the average accumulated equity of nearly $300,000 per U.S. homeowner, equity gains have largely stalled in recent quarters.
Coupled with higher levels of equity extractions, a rising share of homeowners with loan-to-value (LTV) ratios in the 85% to 94% range signal the shifting trend, Hepp says, adding that homeowners would do well to “pay attention to the moderating market.”
“Negative equity is on the rise,” she observes, “driven in part by affordability challenges that have led many first-time and lower-income buyers to over-leverage through piggyback loans or minimal down payments.”
Negative equity refers to a situation where the outstanding balance of the mortgage securing a home exceeds the proceeds that a sale of the home could cover. About 1.2 million U.S. homes had negative equity in the third quarter, says Cotality, 21% higher than a year ago.
The 216,000 homes that fell into negative equity last quarter is 6.7% higher than the second quarter, signaling “possible market difficulties ahead.”
Cotality projects that a 5% rise in home prices could lift 168,000 homes out of negative equity, but a 5% decline would shunt 319,000 more homes into that category.
The Northeast led home equity gains in the third quarter, with Connecticut, New Jersey and Rhode Island posting average increases of $31,500, $27,500 and $16,200, respectively.
More than 60% of states and state equivalents posted equity declines in the third quarter, led by Florida, Washington, D.C., and California, where homes shed an average of $37,400, $35,500 and $32,500 in accumulated home equity, respectively.
“The future performance of highly leveraged loans will hinge on the strength of the U.S. economy and labor market,” added Hepp.
