The homeowner equity boom is over — but a troubling metric is inching up

By Andy Medici

The share of homeowners who are “equity rich” is dropping, and the percentage of them who are underwater on their mortgages is creeping up.

Overall, the share of homeowners whose loan balances are less than half the value of their house has dropped to 46.1% in the third quarter of 2025, down from 47.4% in the second quarter of 2025 and from 48.3% during the third quarter of 2024.

The share of so-called “equity rich” owners dropped even as the national median home price rose to a record of $370,000, according to a fresh numbers from real estate data platform ATTOM.

At the same time, about 2.8% of mortgaged residential properties in the U.S. were considered seriously underwater in the third quarter of 2025 — with a total loan balance at least 25% more than the value of the home. That was up from 2.7% in the second quarter of 2024 and 2.5% in the third quarter of 2024.

"After several years of strong equity growth that peaked in 2022, homeowner equity levels appear to be stabilizing,” said Rob Barber, CEO of ATTOM. “The modest fluctuations seen over the last few quarters may suggest a housing market that's finding balance after an extended period of appreciation."

The states that saw the biggest drops in the share of equity-rich homes included Florida, which fell from 52.5% in the third quarter of 2024 to 46% in the third quarter of 2025 and Arizona, which fell from 50% to 44.5% over the same time. Colorado dropped from 48% in the third quarter of 2024 to 43% in the third quarter of 2025 and Georgia dropped from 46.3% to 41.8%.

The share of seriously underwater properties rose across 46 states over the past year, according to ATTOM. The states and territories with the biggest increases in their share of seriously underwater homes included Washington, D.C., which grew from 3.3% of homes in the third quarter of 2024 to 5.1% of homes in the third quarter of 2025. Maryland grew from 2.4% of homes to 3.5% of homes and Louisiana grew from 10.1% of homes to 11.2% in the third quarter of 2025. 

Metro areas with the highest rates of equity-rich homeowners included San Jose, California (65.8% of mortgaged properties); Buffalo, New York (63.5%); Portland, Maine (61.2%); Los Angeles (60.5%); an Syracuse, New York (59.9%).

Overall, the Midwest has the highest rates of equity-rich homeowners, while the South has the most struggles with underwater properties.

The data comes at a time when the market is shifting but remains challenging for both buyers and sellers.

Overall, there were about 15% more listings on the market in October than the same time in 2024. Houses are also sitting longer too, with days on market growing by about 10%, according to data from Realtor.com.

But median listing prices, after slipping earlier in the year, were up about 1% over the same time last year, according to Realtor.com, hovering around $425,000.

That has meant more deals falling through, according to a survey of hundreds of agents by real estate tech venture Homelight, Most agents surveyed (77%) said the biggest mistake sellers make is overpricing.

Home prices nationally have grown rapidly since the onset of the Covid-19 pandemic.

In the second quarter of 2020, the median sale price for U.S. homes was $317,100, according to data compiled by the Federal Reserve. By the second quarter of 2022, that number was $437,700, up 38%. It dropped to $410,800 in the first quarter of 2025, but that's still up nearly 30% from the early days of the pandemic five years ago.

There are other big factors at play in closing home sales, as well. That includes hundreds of home sales a day that are at risk because the buyer cannot get flood insurance — with the National Flood Insurance Program closed as part of the ongoing federal government shutdown.

Homeowners across the country also are increasingly worried about the cost of traditional home insurance. A survey by Realtor.com of recent and prospective homebuyers found that 88% believe they will pay more for homeowners insurance in the near future, and 42% said they already have experienced a rise in homeowners insurance costs.

Final Thoughts

After several years of record-breaking equity gains, the homeowner equity boom is finally tapering off. With fewer homeowners now “equity rich” and a modest uptick in those underwater on their mortgages, the market appears to be stabilizing rather than crashing. States like Arizona and Florida are seeing noticeable dips in equity levels, but analysts view these as signs of normalization following years of intense appreciation. Rising inventory, longer days on market, and persistent affordability pressures continue to shape a more balanced - yet cautious - housing landscape for both buyers and sellers.