by Calculated Risk on 12/11/2025 04:40:00 PM

From Cotality U.S. home equity dips further this fall

Cotality ... today released the Homeowner Equity Report (HER) for the third quarter of 2025. The report reveals a mixed picture of homeowner equity gains across the United States.

Borrower equity decreased year over year, declining by $373.8 billion or 2.1%. That decline translates to an overall net equity to $17.1 trillion for homes with a mortgage. Homeowner equity peaked at close to $17.7 trillion in the second quarter of 2024 and has since oscillated between $17 trillion and $17.6 trillion.

"As the pace of home price growth slows and markets recalibrate from pandemic peaks, we’re seeing a clear shift in equity trends,” said Cotality Chief Economist Dr. Selma Hepp. “Negative equity is on the rise, 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. While overall home equity remains elevated, recent purchasers with smaller down payments may now face negative equity.”
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While the share of homeowners in negative equity reduced in the second quarter of this year, it ticked up again in the third quarter. In the current quarter, 2.2% of homeowners have negative equity or 1.2 million properties. Another way to think about it is that there’s been a 21% year-over-year rise in the number of homeowners in negative equity with 216,000 more homes falling into the category in the third quarter, a trend that has been gaining steam and signals possible market difficulties ahead.

Compared to the second quarter, there has been a 6.7% increase in the number of mortgaged residential properties sitting in negative equity. This slide in equity tracks with market cycles as the spring homebuying season faded into the slower fall market, during which period there’s a more consistent weakness in home price gains across markets.

This graph compares the distribution of equity (and negative equity) in Q3 vs. Q2. 

About 1.2 million properties are in negative equity (owe more than the property is worth), but this is a fairly small percentage historically.

Most homeowners have substantial equity in their homes.