Why Homeowners Are Getting $30,000 Richer Every Year

Homeownership has many benefits, not the least of which is the chance to build wealth that will be passed down for generations. And that chance has grown exponentially over the past five years.

According to the National Association of Realtors’ most recent quarterly report, homeowners have gained nearly $150,000 in home equity since 2019 — or about $30,000 per year. The massive gains are because of the rapid increase in home prices that started during the pandemic and continues today.

During the third quarter of this year, which spanned from July to September, the median price on an existing single-family home averaged $418,700, representing a year-over-year increase of 3.1%. The NAR report shows prices increased in 196 of the 226 metropolitan areas surveyed. While most cities saw single-digit jumps, there were 15 where home prices surged by 10% or more.

The rapid rise of home prices during the pandemic years has led to an accumulation of record amounts of equity, or how much of your home’s value you own outright. It’s calculated by subtracting your mortgage balance from the property’s market value, so when prices rise, you “own” a larger share of the property, free and clear.

According to data analytics firm Intercontinental Exchange, homeowners had an aggregate of $17 trillion in equity during the first three months of 2024, an all-time high. Moreover, $11 trillion of that equity is tappable, meaning the homeowner can convert that equity into cash through a cash-out refinance, home equity loan or line of credit.

Homeowners may be happy about the price increases, but buyers may have a different take as housing affordability remains tight.

While the latest home price data does show a slight improvement compared to the averages of the prior three months — meaning the increase was smaller than the previous quarter — prospective homebuyers holding out for a significant decrease in buying costs will likely still be disappointed.

Home prices have doubled in many markets since the start of the pandemic, and the prospect of a significant decline is highly unlikely. In a news release, Lawrence Yun, NAR’s chief economist, said the probability of a market crash is “minimal,” primarily because of the large equity gains: Homeowners in financial distress may have the option of using that equity to pay off debts or selling the home and avoiding foreclosure.

Buyers, however, also have to deal with high financing costs. Mortgage rates hovered around 7% for the most of the year but started to decrease over the summer in anticipation of a rate cut by the Federal Reserve. Freddie Mac’s average rate for a 30-year loan reached a low of 6.08% by mid-September.

Since then, however, rates have made a U-turn and have been steadily climbing despite recent Fed rate cuts. The 30-year rate averaged 6.79% for the week ending Friday. And the upward trend may not be over any time soon.

Economic indicators like employment and inflation will determine rate movement in the near term, while the policies put forth by President-elect Donald Trump could also have an impact on rates in the long term.

10 cities with the highest increase in home prices

While equity gains weren’t limited to a specific region of the country, homeowners in these cities saw the largest median price increases over the past year:

1. Racine, Wisconsin — 13.7%
2. Youngstown, Ohio — 13.1%
3. Syracuse, New York — 13%
4. Peoria, Illinois — 12.4%
5. Springfield, Illinois — 12.3%
6. Burlington, Vermont — 11.7%
7. Shreveport, Louisiana — 11.5%
8. Rockford, Illinois — 11.1%
9. Decatur, Illinois — 10.9%
10. Norwich, Connecticut — 10.6%

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