Will home equity levels increase again this spring? What experts say

Home equity levels have been on the upswing for quite a while. In fact, mortgaged homeowners have seen their home equity jump by more than 8% in just the last year alone, according to data provider CoreLogic. 

That uptick in home equity levels largely comes down to a low supply of houses for sale and continued demand from buyers. This drives up prices and home values — and, subsequently, owners’ equity stakes as well. In turn, the average homeowner currently has nearly $300,000 in home equity. 

That equity can be a valuable thing. It means more profits when you sell and, while you’re in the home, you can borrow from it using tools like home equity lines of credit (HELOCs) and home equity loans. And, the home equity and HELOC interest rates are often lower than the alternatives, making them a smart borrowing option for many homeowners.

Still, home equity isn’t set in stone, and as the market changes, home values and equity levels can, too. Here’s what could happen with home equity levels this spring, according to experts.

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Will home equity levels increase again this spring? What experts say

Are you considering using your home equity soon? Experts say home equity levels should continue to increase, and one reason for that is the simple law of supply and demand. 

The U.S. housing market has been short of supply for years — an issue that started when the 2008 housing crash caused homebuilders to pull back significantly. In fact, the country is currently about 3.2 million homes short of demand, according to one analysis.

“The driving trend is too much demand and not enough supply,” says Neil Christiansen, branch manager at Churchill Mortgage. “Until more homes are built and existing homeowners give up their ultra-low interest rate and put their home on the market, home appreciation should continue to see healthy gains throughout 2024 and beyond.”

But while those high interest rates have deterred some homebuyers, there has still been healthy demand in recent months. More than 4 million homes were sold in March alone, according to the National Association of Realtors. And, Fannie Mae predicts home sales to increase 4.2% this year.

“I expect a modest gain in equity this spring,” says Blake Blahut, a broker associate with Realty One Group Inspiration. “Instead of the several percentage points that many homeowners have enjoyed in recent years, I believe it might be more in the 1 to 2% range. While rates are high and the buyer pool is a little smaller, inventory remains relatively low, causing equity growth for most homeowners.”

Find out the top home equity borrowing rates you could qualify for here.

Interest rates are holding back sellers

High interest rates also play another role in propping up equity levels — this time, on the selling end.

“Many existing homeowners are deterred from trading up or downsizing because current mortgage rates have just about doubled for most of them,” says Christopher Gulotta, a clinical assistant professor at NYU’s Schack Institute of Real Estate. 

This, combined with rising home prices, essentially incentivizes homeowners from listing their properties, Gulotta says, only increasing the supply shortage.

Home prices are rising — and will continue to

Finally, home prices have been rising for many years — and that’s not expected to change any time soon. According to the Federal Housing Finance Agency’s House Price Index, home prices were up 7% between February 2023 and February 2024. Fannie Mae’s forecast projects about a 5% increase in prices across the year.

“There is no indication that we would see a slowdown anytime soon,” says Michael Micheletti, chief communications officer at home equity sharing company Unlock. “Since equity is directly related to home prices and values, this means homeowners’ equity is still increasing.”

The bottom line

You don’t have to wait around for home values to rise if you want more equity. Improving your house can help (as long as they’re projects that increase your home’s value), as can making extra payments on your mortgage loan.

“The easiest way to improve your home equity position is to apply additional principal to the monthly mortgage payment,” Christiansen says. “This decreases the loan balance and increases the overall equity balance in your favor.”

And if you do opt to use your home equity with a HELOC or home equity loan, make sure to shop around. Rates, terms, and fees can vary widely from one lender to the next.