U.S. Home Equity, Cotality Finds $11.5 Trillion Is Barely Tapped

Cotality’s Record Home-Equity Divide at a Glance

Cotality reported that U.S. homeowners held $11.5 trillion in tappable home equity in the second quarter of this year, while drawing on very little of it. For real estate investors, the central tension is between a historically large household resource and evidence that it is barely entering borrowing activity. The balance sheet is substantial; the flow from that balance sheet remains exceptionally small.

CNBC reported that borrowers with a mortgage held $17.9 trillion in total equity in the second quarter of this year, equal to an average of $310,000 per homeowner. That average increased by $6,000 during the previous three months. Those figures establish a stronger equity position without establishing that homeowners are converting it into spending, refinancing activity or property transactions.

Tappable home equity is the portion homeowners could borrow against while retaining enough equity to satisfy lenders. It is not cash already withdrawn, and it should not be treated as realized demand. That distinction is the most important one for investors assessing housing wealth, HELOC activity and the broader real estate sector.

Why $11.5 Trillion Is Not the Same as Active Demand

Homeowners originated nearly 20% more second mortgages and home equity lines of credit compared with the first quarter, according to CNBC. Even after that increase, those originations represented less than 0.1% of total tappable equity in the second quarter of this year. The change in originations shows more activity at the margin, while the share of available equity used shows how limited that activity remained relative to the stock of housing wealth.

This creates a clean behavior-to-balance-sheet read-through. Rising originations alone can make borrowing demand appear stronger; measuring them against the available equity produces a more restrained interpretation. For companies and sectors exposed to housing finance or homeowner spending, the relevant signal is not merely whether HELOC and second-mortgage activity increased, but whether equity use becomes material relative to the amount available.

The data do not specify how many homeowners are included, the exact dollar amount withdrawn or Cotality’s methodology and geographic coverage. Those gaps prevent a reliable calculation of participation, loan size or conversion from available equity into borrowing. Investors therefore have evidence of abundant collateral and minimal aggregate use, not a complete map of borrower behavior.

Thom Malone’s Explanation for the Borrowing Restraint

Thom Malone, principal economist at Cotality, said, “The borrowers with the most housing wealth are often the least likely to tap it.” He added, “They tend to have low mortgage rates, strong cash flow, and little reason to move.” His comments frame the apparent contradiction: the households with the largest capacity to borrow may have the weakest need to do so.

Homeowners who purchased during or before the first two years of the Covid pandemic may hold mortgage rates equal to at least one third of current mortgage rates, CNBC reported. The exact rates held by the homeowners in the data are unknown. Even so, the stated gap identifies the condition investors need to track: access to equity does not by itself mean borrowers will accept a separate loan under current terms.

This is why record equity cannot automatically be classified as an immediate catalyst. It may provide financial flexibility without producing a comparable increase in equity withdrawal. A more constructive sector signal would require the borrowing flow to expand relative to tappable equity, rather than merely rising from the first-quarter level.

Geography Splits the U.S. Home-Equity Story

Housing wealth was concentrated most heavily in the West and Northeast. CNBC reported average homeowner equity of over $600,000 in Hawaii and over $600,000 in California, compared with over $400,000 in Massachusetts. Louisiana, Oklahoma and Iowa each had average homeowner equity of just over $100,000.

That dispersion limits the usefulness of a single national average. A market with over $600,000 in average homeowner equity presents a different balance-sheet position from one with just over $100,000, even if both contribute to the same national total. Real estate exposure should therefore be evaluated with state-level equity conditions alongside the aggregate figures.

The direction of home values also differs by location. Home values were dropping in Texas, Minnesota, Colorado, Maryland and the District of Columbia, while homeowners in most states had gained equity. This split makes geography a live risk: a record national pool can coexist with declining equity in specific markets.

The Solvency Signal Is Stronger Than the Spending Signal

• Balance-sheet support: Borrowers with a mortgage held $17.9 trillion in total equity in the second quarter of this year, with an average of $310,000 per homeowner.
• Limited monetization: Second-mortgage and HELOC originations rose nearly 20% from the first quarter, though they remained less than 0.1% of total tappable equity.
• Regional asymmetry: Average equity exceeded $600,000 in Hawaii and California, while Louisiana, Oklahoma and Iowa stood at just over $100,000.
• Contained negative equity: CNBC put the share of borrowers with underwater mortgages at 2.1%, meaning that portion owed more on mortgages than their homes were worth.

Together, these measures support a neutral sector view. The low underwater share and record equity indicate substantial homeowner balance-sheet protection. The very small proportion of tappable equity used offers no comparable evidence of a broad borrowing or spending impulse.

Read-Through for Real Estate and Housing Finance

• Housing finance: The clearest positive condition would be continued growth in second-mortgage and HELOC originations accompanied by a higher share of tappable equity being used. Originations rising without that share becoming meaningful would leave the present thesis intact.
• Real estate: The national equity total is supportive, though falling home values in Texas, Minnesota, Colorado, Maryland and the District of Columbia argue against treating the market as uniform.
• Homeowner-linked demand: The available data establish borrowing capacity, not the exact amount withdrawn or how proceeds were used. Any claim about resulting expenditures would exceed the evidence.

No U.S.-listed company is identified in the supplied evidence, so a company-specific revenue, margin or valuation conclusion would be unsupported. The investable conclusion is thematic: household housing wealth is deep, geographically uneven and largely inactive as a source of new borrowing.

Next Checkpoints for the Home-Equity Thesis

• Utilization: Compare the next reported volume of second mortgages and HELOCs with total tappable equity. The percentage used is more informative than originations viewed alone.
• Average equity: Check whether the next average for borrowers with a mortgage extends or reverses the $6,000 increase recorded over the previous three months.
• Regional direction: Track whether home values continue dropping in the five identified jurisdictions and whether the gap between high- and low-equity states changes.
• Underwater mortgages: Test future readings against the reported 2.1% share of borrowers. A change would help distinguish a stable national balance sheet from emerging geographic stress.

Overall Outlook for U.S. Housing Wealth

The constructive case rests on the depth of homeowner equity: $11.5 trillion was tappable in the second quarter of this year, and mortgage borrowers held $17.9 trillion in total equity. The counterweight is utilization. Less than 0.1% of tappable equity was represented by second-mortgage and HELOC originations despite their nearly 20% increase from the first quarter.

The next decisive signal is whether borrowing begins to scale against the available pool while the underwater share stays contained. Until those measures move together, record home equity is better read as balance-sheet resilience than as evidence of an active demand catalyst. Property Play, the CNBC newsletter associated with Diana Olick, has documented a large reserve whose market relevance depends on what homeowners do next.

This article was independently written by OneDayTrading from public reporting. Read the original (CNBC)