The housing market may be cooling down, but homeowners are still getting wealthier.
According to a new report from real estate data firm CoreLogic, the average home equity for borrowers is now nearly $300,000 — a record high.
Home equity is the difference between your home’s market value and the amount you still owe on your mortgage. If your home is worth $500,000 and you owe $350,000 on the mortgage, you have $150,000 in equity.
CoreLogic found that homeowners with mortgages saw their home equity jump nearly 28%, or an average of $60,200 per borrower, between the second quarter of 2021 and the second quarter of 2022.
As is usually the case when it comes to real estate, those gains were not evenly distributed across the country. Homeowners in Hawaii saw the largest average gains of $130,000 per borrower. California was close behind ($117,000), followed by Florida ($100,000).
CoreLogic attributes the past year’s unusually high gains to the double-digit growth in home prices during the pandemic. As we recently reported, the median home price in the U.S. is now about $440,000, up 15% in a year. There has also been a sharp uptick in mortgage refinancing in recent years, which was made possible by rock-bottom mortgage rates before 2022.
Rising equity is a big deal for many families. It means better opportunities to buy a new home, since their original home may sell for significantly more than the original purchase price. It also means more flexibility when it comes to credit, and can give families options if they need access to cash for large expenses.
Homeowners can take out a home equity loan (sometimes called a second mortgage) if they have good credit and have built up enough equity. A home equity line of credit (HELOC) is another popular option. It’s similar to a home equity loan, but gives you access to a revolving line of credit (like a credit card) rather than a single lump sum payment.