For the first time in four years, fewer than half of mortgaged U.S. homes qualify as “equity-rich,” meaning the owner owes less than 50% of the property’s estimated market value. According to ATTOM’s latest home equity report, the share of equity-rich properties slipped to roughly 46% by early 2025, down from a peak near 49% in 2022. That decline has continued into 2026 as home price growth has cooled in many metros, pulling the national figure to its lowest reading since mid-2021.
At the same time, missed payments on home equity lines of credit are ticking higher. The Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, which draws on Equifax credit-panel data covering millions of borrowers, showed HELOC balances transitioning into delinquency at a faster clip through late 2025 than at any point since the post-pandemic recovery began. Together, the two trends point to a slow but meaningful erosion of the financial cushion that homeownership has provided millions of American families.
The equity cushion is thinning
During the pandemic housing boom, surging prices handed homeowners a windfall. By early 2022, nearly half of all mortgaged properties had loan-to-value ratios below 50%, a level of household wealth concentration that hadn’t been seen in over a decade. That equity served as a buffer against financial shocks: homeowners could refinance, open a HELOC, or sell at a profit if circumstances changed.
Since then, the math has shifted. Mortgage rates climbed above 7% in 2023 and have stayed elevated, cooling buyer demand and slowing price appreciation in many markets. In parts of the Sun Belt and Mountain West, where pandemic-era gains were steepest, values have actually retreated. Austin, Phoenix, and several Florida metros have seen price declines or stagnation that directly eat into owner equity. Meanwhile, homeowners who took out HELOCs or cash-out refinances during the boom added debt against properties whose values are no longer rising as fast, or at all.
The result: ATTOM’s data shows the equity-rich share falling for several consecutive quarters, a reversal that has brought the national figure back to levels last seen when the post-pandemic price surge was just getting started. Most homeowners still hold positive equity, often substantial amounts built up during the rapid appreciation of 2020 and 2021. But the margin of safety is narrower than it was, and for owners in softer markets, it is narrowing faster.
HELOC delinquencies are rising, and rates are a big reason
Home equity lines of credit carry variable interest rates, typically pegged to the prime rate, which moves in lockstep with the Federal Reserve’s benchmark. When the Fed raised rates aggressively in 2022 and 2023, HELOC borrowers saw their monthly payments jump. A homeowner who opened a $100,000 line at 4% in 2021 could be paying closer to 8.5% or more on outstanding balances today, roughly doubling the interest cost.
The Federal Reserve’s quarterly delinquency data, compiled from Call Report filings by thousands of commercial banks, shows that delinquency rates on residential real estate loans, a category that includes HELOCs alongside traditional mortgages, have been drifting upward. The New York Fed’s household debt report adds granularity: its credit-panel data can isolate HELOC performance specifically, and the recent readings confirm that the share of HELOC balances 30 or more days past due has climbed from the historic lows recorded in 2022.
To be clear, these delinquency rates remain well below the peaks of the 2008 to 2010 foreclosure crisis, when residential loan delinquencies exceeded 10%. The current environment is not a replay of that period. But the direction of travel matters. After years of historically clean loan performance, the upward drift signals that a growing number of borrowers are struggling to keep up with payments on debt secured by their homes.
Why the two trends reinforce each other
Falling equity and rising HELOC delinquencies are not independent problems. They feed into each other in ways that can accelerate financial stress for affected households.
When home values flatten or decline, borrowers who drew heavily on HELOCs find themselves owing a larger share of their property’s worth. That higher loan-to-value ratio limits their options. Refinancing becomes harder because lenders require more equity as a cushion. Selling may not generate enough proceeds to cover the mortgage and the HELOC balance, especially after transaction costs. And banks, seeing weaker collateral values on their books, may freeze or reduce existing credit lines, cutting off a source of liquidity that some homeowners were counting on.
On the other side, missed HELOC payments can trigger penalty rates, fees, and credit score damage that make it more expensive to borrow elsewhere. A homeowner who falls behind on a HELOC and simultaneously watches their equity shrink faces a compounding problem: fewer escape routes and higher costs on the debt they already carry.
Federal data does not formally model this feedback loop, and the correlation between the two trends does not prove direct causation. But the mechanism is well understood by housing economists, and it played a significant role in the last major housing downturn. The difference today is that the starting point is much healthier: most owners have far more equity than borrowers did in 2007, and lending standards have been considerably tighter since the Dodd-Frank reforms.
What homeowners should be watching
For anyone with an active HELOC, the practical steps are concrete. First, check your current loan-to-value ratio using recent comparable sales in your neighborhood, not just an automated estimate from a real estate portal. Automated valuations can lag actual market conditions by months, especially in areas where sales volume has dropped.
Second, review your HELOC’s rate adjustment schedule and payment reset terms. Many HELOCs have a draw period, often 10 years, followed by a repayment period in which the borrower can no longer access new funds and must begin paying down principal. Borrowers who opened lines during the low-rate years of 2020 and 2021 may be approaching or entering that repayment phase, which can cause a sharp jump in monthly obligations even without a rate increase.
Third, if you’re already feeling payment pressure, contact your lender before you miss a payment. Banks have more flexibility to offer temporary hardship arrangements, modified repayment plans, or rate adjustments when a borrower reaches out proactively. Once a loan becomes seriously delinquent, those options narrow considerably.
Finally, prioritize paying down variable-rate balances like HELOCs over fixed-rate debt when possible. Variable-rate obligations are the most sensitive to further rate changes, and reducing the outstanding balance directly lowers the interest cost each month.
The ripple effects beyond individual households
Home equity has historically served as a financial backstop for middle-income families, funding everything from emergency medical bills to small-business launches and college tuition gaps. When that cushion thins and missed payments rise at the same time, the effects extend well beyond individual balance sheets.
Consumer spending power contracts as homeowners grow more cautious about tapping their properties. Small contractors who depend on home-improvement projects see fewer jobs. Retailers in housing-dependent communities feel the pullback. Local governments that rely on property tax revenue face tighter budgets if assessed values stall or decline.
Banks, too, adjust their behavior. Lenders that see rising delinquencies on home equity products tend to tighten credit standards, reduce available lines, or raise borrowing costs, moves that can restrict access to credit for new applicants even if their individual finances are solid. That tightening can slow housing market activity further, reinforcing the cycle of softer prices and shrinking equity.
None of this points to an imminent crisis. The housing market in mid-2026 is fundamentally different from the overleveraged landscape of 2007: underwriting standards are stricter, most borrowers hold substantial equity, and the banking system is better capitalized. But the shift from a period of rapidly expanding home wealth to one of gradually contracting equity and rising payment stress is a transition worth tracking closely, especially for the millions of households whose financial plans depend on the value locked inside their homes.
