That’s according to a report from mortgage data company Black Knight this week, which found that the average amount of equity held by mortgage-holders has sunk to $301,000 as of September, down from $331,000 at its peak in May, as home prices have fallen from the record highs they hit earlier in the year. The housing market has been hammered by the Federal Reserve’s campaign of interest rate hikes, which have made mortgage rates spike, driving many buyers from the market. While many homeowners only really notice the value of their home when they buy or sell it, home equity is an important source of wealth for middle-class families. Having home equity—how much more your house is worth than what you owe on your mortgage—can give you a source of cash to tap if you need it. It can also protect you from having your house foreclosed on in the event that you find yourself unable to continue making mortgage payments, since you’ll be able to sell it at a profit. Homeowners can really get in trouble if their mortgage gets underwater, that is, if the amount they owe exceeds the value of their home. The number of underwater homes has shot up by 275,000, more than doubling in the wake of the recent decline in home prices, according to Black Knight. Fortunately for owners today, that’s relatively few by historical standards, and far less than before the pandemic. Those who bought at the peak of home prices in late 2021 or early 2022 are the most vulnerable to going underwater, Black Knight said. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.
