Homeowners in the U.S. are experiencing their highest share of home equity since the 1950s, driven by rapid increases in property values.
According to the Federal Reserve’s latest report on financial accounts, homeowner equity as a percentage of total real estate value for owner-occupied homes reached 72.7% in the second quarter of 2024, marking its highest level since 1958.
Despite an increase in mortgage debt, home values have risen at a faster rate, boosting homeowner equity shares. Realtor.com® economist Jiayi Xu explains: “This trend reflects a housing market where increased demand and limited inventory have propelled property values, significantly enhancing homeowner equity and its share.”
The total value of owner-occupied real estate hit a record high of $48.2 trillion for the quarter, representing an 8% increase from the previous year and double the aggregate value from ten years ago.
While total mortgage debt in the U.S. also set a new record at $13.1 trillion, it grew more slowly due to sluggish home sales during the quarter. Mortgage debt increased by just 3% from last year and is up 40% compared to a decade earlier.
Aggregate homeowner equity reached $35.1 trillion for the quarter, up 10% from last year and triple what it was ten years ago.
The rise in total equity is attributed to increasing home values, expansion in owner-occupied housing stock through new construction, and a growing number of homes owned outright as aging baby boomers pay off their mortgages completely.
U.S. Census Bureau data shows that nearly 40% of owner-occupied homes are now mortgage-free—the highest share since 2005.
These factors combined mean homeowners have not enjoyed such high levels of equity since the 1950s when both homeownership rates were lower and VA and FHA loans were relatively new.
In the last quarter, average equity for existing homeowners was approximately $267,000, providing them with significant financial security even if home values decline.
If home values were to drop by 10%, total homeowner equity would still be at 69.7%, similar to late 2021 levels. A more severe decline of 20% would bring equity shares back to their levels from 2019.
Although such declines are unlikely, these scenarios highlight the strong position typical homeowners currently hold in today’s market. Home values would need to plummet significantly before most properties fall underwater; however, recently purchased homes remain most vulnerable.
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