With home prices projected to enter a period of deceleration over the course of 2025 and 2026, a new report shows that the share of negative equity rose in the U.S. from the second quarter to the third quarter — the first quarterly rise since the fourth quarter of 2022.
While average equity gains were $5,700 on an annual basis, this is far less than the second quarter’s annual equity gains of $25,400. Nearly one million residential homeowners are contending with negative equity on their homes as the number of residential properties that fell into negative equity increased by 30,000 homes, or 1.8%, in the third quarter.
“As home prices flattened in the third quarter, home equity gains also slowed, even declined in some regions of the country,” said Dr. Selma Hepp, chief economist at CoreLogic, who revealed these updated figures in its third-quarter Homeowner Equity Report (HER).
The rate of equity growth dropped from 8% to 2.5% from the second to third quarter, sending total homeowner equity for borrowers with mortgages to $17.5 trillion as of September 30. Homeowners with mortgages account for roughly 62% of all U.S. properties.
Equity losses are also tied to “natural disaster events since households can lose a lot of their equity following a catastrophe, particularly if not property [sic] insured,” Hepp added.
For example, Hawaii tops the list of states with the largest home equity declines, a result of 2023’s devastating wildfires in Maui.
Colorado, and Idaho, which were former work-from-home hotspots “that attracted people with their picturesque landscapes,” the report reads, also saw home equity drop this quarter.
In 2024, Florida suffered its fair share of natural disasters, to include the consecutive Hurricane’s Debby, Helene, and Milton — leading to Hepp’s surprise that homes in that state have not seen more equity losses as a result of such events, she told NMP in an interview.
“I am surprised to have seen some of the increases in home prices, particularly like Lakeland, Cape Coral. Those were the weakest metros for a long time this year,” Hepp says. “I’m trying to understand why, and I guess maybe there’s something happening with the signals there.”
Markets that have been especially strong since the beginning of the year, Hepp explains, like parts of New York or Cleveland, are cooling because “people are finding deals.”
“But,” she continues, “areas where prices were going up really strongly, there’s some fatigue in a sense in the housing markets because home prices are growing at that fast pace and you start losing people and then home prices started slowing down or declining a little bit.”
“A lot of that price softening that we saw in Florida, in parts of Texas and Southeast, are areas that have higher exposure to natural disasters,” Hepp says. “You did see more inventory come online and we are seeing price adjustments now.”
States in the Northeast, where equity gains are strongest, also saw the most home price growth. Prices in New Jersey and Rhode Island reached new highs in October, with these states claiming the top two spots for year-over-year price gains, rising 8.1% and 7.5%, respectively.
