Home Equity Growth Slows Owner Spending
Home equity rose to $35T since 2020, but higher taxes, rates and lending limits make it harder for homeowners to benefit from that wealth.
NEW YORK — Since 2020, home equity has increased by approximately 80% from $19.5 trillion to about $35 trillion due to rising home values, but many say that the other side of the coin is the significant increase in property taxes that have come with that rise in equity.
ICE Mortgage Technology estimates that the average homeowner with a mortgage had about $313,000 in equity at the start of 2025. The Federal Reserve calculated that the rise in home equity and value was twice as much as the financial wealth accumulated from stocks and bonds by the end of 2024.
Despite the rise in wealth from their homes, many homeowners say they feel less well-off and have trimmed discretionary spending because of higher taxes. Tapping into that home equity for renovations or college tuition also has become more expensive due to higher interest rates and tighter lending requirements.
Some homeowners also are holding onto houses because of the potential for large capital-gains tax bills. Owning a home has been considered one way to build familial wealth, but the financial rewards of owning a home are less than ideal.
In the fourth quarter of last year, ICE found that consumers tapped only 0.41% of their available home equity, well below the 0.92% quarterly average in the 10 years before the Fed started raising interest rates in 2022.
Part of that is also due to three-quarters of mortgage holders paying 5% or less on their loans, according to the Urban Institute, which gives them little incentive to seek out home equity loans with rates of 7% or more.
Source: Wall Street Journal (04/07/25) Dagher, Veronica; Tergesen, Anne
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