Balancing Equity Preservation with Housing Affordability
Dr. Selma Hepp discusses the recent housing updates. Home prices in the U.S. have slowed significantly, with some regions even seeing declines due to housing affordability challenges, rising inventory and weaker demand. While this trend is creating new opportunities for buyers, especially with wages now growing faster than home prices, it has also stalled the wealth-building benefits of rising home equity. On average, homeowners with mortgages still hold over $300,000 in equity, though recent losses show wide regional variation, with places like Hawaii and Florida seeing sharp declines while states in the Northeast posted gains.
Despite equity, affordability levels remaining historically high, more recent buyers are increasingly facing negative equity, where they owe more than their homes are worth. Though still far below Great Financial Crisis levels, about 1.2 million borrowers are now underwater, concentrated in regions like Louisiana, Oklahoma, Iowa, Texas, and Florida. Negative equity reduces financial flexibility, limits refinancing or relocation options, and can increase foreclosure risks, posing both personal financial challenges for homeowners and broader risks for the housing market and economy.
