Half of America’s Homes Are Equity-Rich—And These States Have the Most

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According to real estate data company ATTOM‘s second-quarter 2024 U.S. Home Equity & Underwater Report, American homeowners are sitting on a pile of home equity. 49.2% of mortgaged residential properties in the U.S. were considered equity-rich in the second quarter of 2024 after years of sitting on the refinancing sidelines amid high interest rates. ATTOM’s definition of equity-rich means the combined estimated amount of loan balances secured by the property was no more than half of their estimated market values.

The saying “a rising tide lifts all boats” proved to be true in real estate, too, with increasing house prices lifting homes out of negative equity. The portion of home mortgages that were underwater declined to 2.4% during the second quarter, meaning one in 42. That was down from 2.7% in the prior quarter and the lowest level since at least 2019.

Riding Some of the Biggest Home Price Spikes We’ve Seen in Recent Years

Equity gains occurred during the inventory-starved post-COVID years when interest rate hikes brought the housing market to a standstill and forced property owners to curtail borrowing. However, as rates should begin to tumble downward, owners are now able to invest funds.

Rob Barber, CEO of ATTOM, said on the company’s website:

“Homeowner wealth took a notable turn for the better during the second quarter, as equity levels piggybacked on some of the biggest home-price spikes we’ve seen in recent years. After a period where equity seemed stagnant or even declining, this brought another boost of good news for homeowners from the enduring housing market boom. Supplies of homes for sale remain limited, and buyer demand is typically elevated during the summertime. So, it should be no surprise if home values go even higher and take equity along for the ride.”

According to ATTOM’s data, measured annually, equity-rich levels were up in 31 states, with the biggest quarterly increases in lower-priced markets, mainly across the South and Midwest. 

The top five were:

• Kentucky (mortgaged homes considered equity-rich increased from 28.7% in the first quarter of 2024 to 37.4% in the second quarter of 2024)
• Illinois (up from 28.3% to 36.1%)
• Missouri (up from 38.3% to 45.5%)
• Oklahoma (up from 28.1% to 34.5%) 
• Alabama (up from 35.7% to 41.9%)

The Northeast and West Saw Huge Equity Gains

However, the highest levels of equity-rich homeowners were in the Northeast and West. Here are the top five states: 

• Vermont (83.5%)
• Maine (61.5%)
• New Hampshire (61.1%)
• Montana (61.1%)
• Rhode Island (60.2%)

Unsurprisingly, affluent cities with populations over 500,000 and high-priced homes (median home values over $400,000) also saw large equity gains. These included:

• San Jose (70.4% equity-rich; second-quarter median home price $1.6 million)
• Miami (65.4%; median price $485,000)
• San Diego (65.4%; median price $910,000)
• Los Angeles (65.3%; median price $963,500)
• Portland, Maine (65.1%; median price $499,411)

In the Midwest, Grand Rapids, Michigan (57.2% equity-rich; median price $325,000) topped the equity-rich charts.

How to Harness Your Equity

With interest rates scheduled to drop—possibly precipitously—in 2025, property owners nationwide will be in the fortunate position of being able to utilize their equity to invest. For many, it could mark a mighty leg up at the start of their investment journey. For others, it could be the final piece in a decades-long plan that finally allows them to escape the rat race and retire. 

Many investors with sizable portfolios might take the opportunity to transition to large-scale investing with multifamily and commercial buildings. If these scenarios apply, here are your most accessible investment options.

Cash-out refinance to buy a new investment property

Banks are gearing up for a refinancing bonanza in 2025. A cash-out refinance to a lower rate will allow you to take out equity from your home to invest while keeping your payment the same or even dropping it. 

Get a home equity line of credit for BRRRRs

The good thing about a HELOC is that once you have gone through the stages of a BRRRR and refinanced your rental, you can put the money back into your HELOC until you find the next property and repeat the process. With a HELOC, you only pay for what you use, so it’s possible to stagger the money you take out to close on one refinance while your next is in escrow, turbocharging your investments without incurring high HELOC payments.

Invest in REITs or high-flying stocks

If you find hands-on real estate investing too labor-intensive and risky, investing in well-performing REITs (real estate investment trusts) or stocks might be a passive option that appeals to you. While many real estate investors might view the stock market as inherently risky, without the benefits of cash flow, depreciation, and expense write-offs, you could still make a fortune if you invest in it correctly, the funds from which you can then redeploy in real estate.

Tech giant Nvidia’s stock price has surged a meteoric 262% in just over the last year, as its chips have fueled the artificial intelligence (AI) boom, outstripping any real estate price hikes or other tech stocks. No wonder the company, which is valued at $3+ trillion, has spent $374 million to buy most of its Santa Clara headquarters. Many of its executives and board members have been cashing in on their stocks to buy luxury real estate. 

Being a savvy investor means hitching your cash to one high-performing investment after another to boost growth.

Become part of a syndication

If investing in the stock market seems too much like casino gambling, you might want to stick to real estate for passive investing. In that case, joining a syndication could be a good idea. 

However, if we’ve learned anything from recent interest rate hikes, it’s that syndications can be risky, too. Those with short-term financing are vulnerable when black-swan economic events like a pandemic, war, or a financial crash occur. 

If you’re allowing others to invest your cash for you, make sure you know everything about their financing—or instead, form your own syndication with a close-knit team of partners so you can make your own financial decisions and invest according to your risk tolerance.

Become a hard money lender 

Let other people deal with the tenants, termites, toilets, contractors, permits, and midnight plumbers. If you’re tired of the labor-intensive nature of landlording or flipping and have enough equity to lend to investors, getting a HELOC and lending out your cash as a hard money lender might be the way to go. 

Doing so would need to be at a considerably higher rate of return than you are paying on your line of credit. You’ll need to vet your investor thoroughly, with safeguards such as a first-lien position to protect yourself. You can enjoy watching your money go to work while focusing on other things.  

Sell and 1031 exchange

1031 exchanges are great wealth builders because they defer your capital gains taxes. Selling a home with a lot of equity and rolling it into another project with a low interest rate has been a proven strategy to build tax-free wealth. 

What’s also good about 1031 exchanges is that they are flexible in application. You can choose to invest some or all of your equity in one of several projects, and they do not have to be exactly the same type of commercial building as the one you have sold.

Final Thoughts

Shaking the equity tree and watching the fruits of your hard-earned investing fall into your arms is always a good feeling, but keep a few golden rules in mind when using home equity. 

First, it’s not free money. Whether you take a HELOC, HELOAN, or do a cash-out refi, you will be paying an interest rate on borrowing against your property’s increased value, so make sure whatever you invest in earns more than the rate you are paying. 

Second—and this follows from the previous point—don’t be tempted to treat yourself to a selfish purchase, justifying it by saying, “I deserve it,” or “I’ll just do this for me and invest the rest.” Never spend the principal, always the profit. Only spend the money you are borrowing on something that makes you money.

Stick to these golden rules and ride your forthcoming equity train off into the sunset.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.