Home equity, which is the part of a home’s value that the owner truly owns, has recently hit a bit of a pause in growth. According to Cotality’s latest Homeowner Equity Report for the second quarter of 2025, the average U.S. homeowner lost about $9,200 in equity over the past year. Despite this drop, the average homeowner still has roughly $307,000 in equity—that’s a healthy figure and one of the highest ever recorded. Across the country, homeowners with a mortgage collectively hold around $17.5 trillion in equity.
However, this overall picture masks some trouble spots. Home prices have dipped in places like the District of Columbia and Florida, causing average equity in those markets to drop significantly. More American homeowners are finding themselves in “negative equity,” meaning their mortgage is higher than the current value of their home. This group grew by 18% compared to last year, which translates to an additional 175,000 homes underwater.
The National Equity Picture: Growth Slowing Down
Homeowners saw their equity rise by $25,000 in 2023 and another $4,500 in early 2024, but that momentum has slowed. The slower pace is linked to home prices rising very modestly—only about 3% is forecast by mid-2026, the slowest growth since 2008. This slowdown means that many homeowners won’t see big increases in their home equity going forward. Seasonal home price ups and downs are more noticeable now because prices aren’t climbing steadily.
What This Means for Texas Real Estate
Texas homeowners are feeling these changes too, especially in cities like McAllen. The report points out that McAllen has seen a significant increase in negative equity. This means more homeowners owe more on their mortgages than their homes are currently worth. This rise in negative equity is often linked to falling home prices or natural disasters, situations that have challenged several Texas areas.
While some Texas markets are impacted by these equity declines, remember that Texas as a whole has a very diverse real estate market. Cities not mentioned specifically may still be experiencing more stable home price growth, supporting ongoing equity accumulation for homeowners there. Still, increased negative equity in places like McAllen signals caution for buyers, sellers, and investors in these areas.
Looking Ahead: What to Expect
Because the home price growth is slow but expected to continue, most homeowners might not see large equity gains soon. Roughly 144,000 properties nationally would regain equity if home prices rose by 5%, but nearly twice as many—242,000—would slip into negative equity if prices drop by the same amount. This creates a delicate balance in the real estate market.
For Texas, this forecast means homeowners and real estate professionals should watch market shifts closely. Homeowners leveraging their equity for other financial needs should be mindful of changing home values. Buyers in Texas might find some opportunities in markets with softened prices but must be careful about the risk of negative equity.
Final Thoughts for Texas Homeowners and Real Estate Stakeholders
The latest equity report reminds us that while the U.S. housing market remains strong on many fronts, challenges are coming for some regions, including parts of Texas. The increase in negative equity in cities like McAllen highlights the importance of understanding local conditions. Homeowners in Texas should stay informed about market trends, as these can affect home values and financial options.
For sellers and buyers in Texas, the key is to be cautious but also look for opportunities where the market remains stable or growing. Real estate professionals should guide clients carefully through these changing conditions to avoid risks related to falling equity.
Overall, even with the recent equity stall, Texas real estate continues to be an important player in the national market, but keeping an eye on regional shifts will prove essential in 2025 and beyond.