Homeowner equity declined in the fourth quarter on an annual basis as the typical mortgaged homeowner shed an average of $8,500 on cooling home price gains, according to newly released data from Cotality.
That figure is notably less than the $13,300 of home equity the typical borrower lost in the third quarter.
“As home price growth has slowed, homeowner equity has largely leveled off, but it remains historically high,” said Selma Hepp, chief economist of Cotality, in the firm’s latest quarterly home equity report, released Thursday.
To kick off 2026, the average U.S. homeowner with a mortgage was sitting on roughly $295,000 in accumulated home equity. Just 2.2% of those borrowers were in a position of negative equity at the end of the fourth quarter, meaning those 1.2 million households owed more on existing liens against their homes than the sale of those homes would settle.
That represents a 15% increase in homes with negative equity over the year and a 3.6% increase from the third quarter. Cotality data shows that negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, one of the initial consequences of the 2008 financial crisis.
Existing borrowers controlled slightly under $17 trillion in total home equity at the end of the fourth quarter, approximately $11 trillion of which is tappable.
By dollar volume, New Jersey, Wyoming and Connecticut observed the largest annual equity gains in the fourth quarter, posting respective increases of $26,100, $23,100 and $20,300 on average. States that saw the largest declines in equity were Florida, California and Arizona, which shed averages of $29,400, $24,700 and $23,900.
Cotality reported that 28 states posted average equity declines in the fourth quarter, compared to 32 states posting losses in the third quarter.
“Looking ahead, muted home price appreciation could limit additional equity gains, and any deterioration in the labor market could pressure household balance sheets,” added Hepp, “particularly for more recent buyers with thinner equity cushions.”
The report also noted that loan-to-value ratios, which measure debts on a property against the value of that property, moved higher in the fourth quarter, with a particular increase in the portion of homeowners with 85% to 94% LTVs. Higher LTVs present greater risk for lenders because it means homeowners have less of their own money in a home.
