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The total value of owner-occupied real estate in the U.S. dipped slightly to $47.9 trillion in Q1 2025, shedding $200 billion from the end of 2024. However, this remains the fourth-highest value on record, and homeowners retain a massive equity cushion of $34.5 trillion, which provides significant protection against potential market downturns. Key factors driving the modest decline include softening price growth and a slowdown in new home construction.
The aggregate market value of homes retreated from $48.1 trillion at the end of 2024 to $47.9 trillion in the first quarter of 2025, based on data from the Federal Reserve's Z.1 Financial Accounts report. This reflects a continued pullback from the peak of $48.8 trillion recorded in Q2 2024. Industry analysis attributes this trend to two primary factors: weaker house price growth and a significant slowdown in new residential construction. Completions of new homes were down 12.3% year-over-year in April 2025. High mortgage rates have continued to weigh on buyer demand, allowing inventory to grow and contributing to a more balanced market, which modestly tempers overall value growth.
Home equity—the portion of a property's value owned outright, free from mortgage debt—closely followed the aggregate value's path. It fell by $250 billion in Q1 2025 to $34.5 trillion. Despite this quarterly dip, homeowner equity has increased by $590 billion over the past year. When measured as a proportion of total real estate value, equity stood at 72% in Q1 2025. While this is slightly below the levels seen throughout 2024, it is still higher than any period between 1961 and 2023. This high equity level acts as a critical financial buffer for both individual homeowners and the broader economy.
The current high level of home equity is not a cause for concern. In fact, it provides a substantial safety net. Analysis shows that even if home values were to fall by 10% overnight, the aggregate equity-to-value ratio would drop to a still-respectable 68.9%, similar to mid-2021 levels. In a more severe scenario of a 20% price plunge, equity would be at 65%, which is no worse than the position homeowners held in 2019. The existing supply shortage of homes continues to put upward pressure on prices, making large national price declines extremely unlikely in the near term.
While home values and equity saw modest declines, total mortgage debt climbed to a new high of $13.4 trillion in Q1 2025. This represents a $45.3 billion (0.3%) increase from the previous quarter and a 2.9% ($374.5 billion) increase compared to the beginning of 2024. It is important to view this debt increase in context: the rise has been modest, and because homeowner equity is near a record high, the overall financial health of homeowners remains strong.
In summary, while the market is normalizing, the data indicates resilience. Homeowners are sitting on a near-record equity cushion, and fundamental market dynamics suggest stability. For prospective buyers, this signals a market moving toward better balance. For existing homeowners, the high equity provides significant financial security.
