{"id":34424,"date":"2023-01-18T13:45:12","date_gmt":"2023-01-18T21:45:12","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=34424"},"modified":"2026-04-05T21:29:49","modified_gmt":"2026-04-06T04:29:49","slug":"home-equity-cooling-market","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/home-equity-cooling-market\/","title":{"rendered":"What’s Happening to Your Home Equity in a Cooling Housing Market?"},"content":{"rendered":"

The housing market is cooling, and you’re likely curious about how that’s affecting your home equity standing. While there are fewer homebuyers due to higher interest rates, the supply of homes remains tight, and that keeps home prices from falling too quickly. In fact, even though existing-home sales dropped 17.8% from 2021 to 2022, the December 2022 median existing-home sales price actually climbed 2.3%<\/a> from the previous year.<\/p>\n

According to the National Association of Realtors (NAR), home prices rose in all regions of the country, marking 130 consecutive months of year-over-year increases, the longest-running streak on record.<\/p>\n

\u201cHome prices nationwide are still positive, though mildly,\u201d Lawrence Yun, NAR chief economist, said in a Jan. 20, 2023, news release<\/a>, adding that he expects \u201csales to pick up again soon since mortgage rates have markedly declined after peaking late last year.\u201d However, this could vary depending on your specific market.<\/p>\n

We asked two experts to help get to the bottom of what\u2019s happening to home equity in the current housing market:<\/p>\n

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  1. Donald J. Martin<\/a>, SCRP, RAA, GAA, CDEI, who has been chief appraiser at Martin Appraisals in the Chicagoland area for 46 years.<\/li>\n
  2. Dustin Parker<\/a>, a top-selling agent who works with over 81% more single-family homes than the average agent in the Millsboro, Delaware area.<\/li>\n<\/ol>\n

    In this article, we look at some of the most pressing home equity questions homeowners have about the current housing market and lay out answers from the experts.<\/p>\n\n\n\n\n\n

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    \n \"homelight\n <\/div>\n \n

    How Much Is Your Home Worth Now?<\/h3>\n

    Get a near-instant home value estimate from HomeLight for free. Our tool analyzes the records of recently sold homes near you, your home\u2019s last sale price, and other market trends to provide a preliminary range of value in under two minutes.<\/p>\n \n

    \n Get Estimate<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n\n
    <\/div>\n

    What is home equity?<\/h2>\n

    Home equity<\/a> is the amount of your home\u2019s value that belongs to you. In other words, it\u2019s the amount of your home\u2019s value minus any loans, mortgages, or other liens that are attached to your home.<\/p>\n

    Equity can come from paying down your mortgage loan, gains from home appreciation, or adding upgrades that increase the value of your property.<\/p>\n

    So if your home is worth $400,000, and you have $320,000 left in unpaid principal on your mortgage loan, that means you hold $80,000 equity in your home or 20%.<\/p>\n

    <\/div>\n

    How do I calculate my home equity?<\/h2>\n

    To calculate your home equity, you need to know three things:<\/p>\n

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    1. Your home\u2019s current value<\/li>\n
    2. The principal balance you still owe on your mortgage<\/li>\n
    3. Additional liens or property loans you still need to pay<\/li>\n<\/ol>\n

      From there, you can roughly calculate your home equity by using this simple equation:<\/p>\n

      Your Home\u2019s Value – (Total Amount of Liens + Principle Balance) = Your Home Equity<\/i><\/p>\n

      It\u2019s important to note that banks use additional calculations<\/a> for the purposes of home equity loans, refinances, and lines of credit. We\u2019ll look at options to unlock your home\u2019s equity later in this post.<\/p>\n

      <\/div>\n

      What caused the recent home equity high?<\/h2>\n

      Home equity soared throughout the last two years. According to Black Knight, the total amount of home equity in the U.S. broke back-to-back records in 2020 and 2021 \u2013 surging 35%<\/a> in 2021.<\/p>\n

      Martin says the seeds of the housing boom of the last few years were planted during the last housing crash and Great Recession<\/a> that followed.<\/p>\n

      \u201cPeople were very scared,\u201d he explains. \u201cThere was a period of years where people were not buying. We had pent-up demand occurring, where people could afford to buy a home but were holding off.\u201d<\/p>\n

      He says that when employment bounced back, and interest rates continued to hit lows, it unleashed that pent-up demand for housing.<\/p>\n

      \u201cWith the low interest rates and the housing market being at an affordable level, it begins to fuel this engine,\u201d he says.<\/p>\n

      That engine, sparked also by additional factors such as inflation<\/a>, a rise in remote work, and housing inventory shortages, pushed housing prices upward. Ultimately, housing prices jumped<\/a> 45% from the winter of 2019 to June of 2022 \u2013 hitting all-time highs.<\/p>\n

      <\/div>\n

      What\u2019s occurring in the housing market now?<\/h2>\n

      To understand what\u2019s happening with your home\u2019s equity, it\u2019s worth digging into current housing market trends<\/a>. Here are some patterns we\u2019re seeing in this cooling housing market:<\/p>\n