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  • Writer's pictureJacob Williamson

A Drop in Equity Doesn’t Mean Low Equity


You may see media coverage talking about a drop in homeowner equity. What’s important to understand is that equity is tied closely to home values. So, when home prices appreciate, you can expect equity to grow. And when home prices decline, equity does too. Here’s how this has played out recently.


Home prices rose rapidly during the ‘unicorn’ years. That gave homeowners a considerable equity boost. But those ‘unicorn’ years couldn’t last forever. The market had to moderate at some point, which we saw last fall and winter.


Equity was impacted as home prices dropped slightly in the back half of 2022. Based on the most recent report from CoreLogic, there was a 0.7% dip in homeowner equity over the last year—however, the headlines reporting that change aren’t painting the whole picture. While home price depreciation during the second half of last year caused equity to drop, the data shows homeowners still have near-record amounts of equity.

The graph below helps illustrate this point by looking at the total amount of tappable equity in this country going back to 2005. Tappable equity is the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio (LTV). The data shows a significant equity boost during the ‘unicorn’ years as home prices rapidly appreciated (see the pink in the graph below).


Tappable Equity Still Near All-Time Highs Jacob Williamson Realty Century 21 Affiliated Realtor
Tappable Equity Still Near All-Time Highs Jacob Williamson Realty Century 21 Affiliated Realtor

But here’s what’s key to realize – even though there’s been a slight dip, total homeowner equity is still much higher than before the ‘unicorn’ years.


And there’s more good news. Recent home price reports show the worst home price declines are behind us, and prices have started to go up again. As Selma Hepp, Chief Economist at CoreLogic, explains:

“Home equity trends closely follow home price changes. As a result, while the average amount of equity declined from a year ago, it increased from the fourth quarter of 2022, as monthly home prices growth accelerated in early 2023.”

The last part of that quote is essential and is the piece of the puzzle the news leaves out. To further emphasize the positive turn we’re already seeing, experts say home prices are forecast to appreciate at a more normal rate over the next year. In the same report, Hepp puts it this way:

The average U.S. homeowner now has more than $274,000 in equity – up significantly from $182,000 before the pandemic. Also, while homeowners in some areas of the country who bought a property last spring have no equity as a result of price losses, forecasted home price appreciation over the next year should help many borrowers regain some of that lost equity.”

And even though Odeta Kushi, Deputy Chief Economist at First American, references a slightly different number, Kushi further validates the fact that homeowners have a lot of equity right now:

“Homeowners today have an average of $302,000 in equity in their homes.”

That means if you’ve owned your home for a few years, you likely still have way more equity than before the ‘unicorn’ years. And if you’ve owned your home for a year or less, the forecast for more typical price appreciation over the next year should mean your equity is already on the way back up.


Bottom Line

Context is everything when looking at headlines. While homeowner equity dropped some from last year, it’s still near all-time highs. Let’s connect so you can get the answers you deserve from an expert here to help as you plan your move this year.


Jacob Williamson Realty

Century 21 Affiliated | Realtor

714-408-5379

DRE 02179062

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