How Home Equity Keeps You Financially Strong, Even in a Shifting Market

Recent reports on softening home prices may raise questions about your home’s value. However, the numbers make it clear—despite minor price declines in certain areas, homeowners continue to hold significant equity advantages.

The Connection Between Home Prices and Equity

Home equity rises and falls alongside home prices. When prices go up, your equity grows. When prices ease, that growth naturally slows. Here’s how that trend has unfolded recently.

Following the record-breaking surge of 2020 and 2021, a bit of cooling was only to be expected.

At that time, the supply of homes for sale reached historic lows. With so few options available, competition among buyers drove prices—and homeowner equity—sharply higher.

But that rapid pace couldn’t last indefinitely. The market was bound to balance out, and that’s exactly what’s happening now.

As more listings hit the market this year, price growth has slowed—and with it, the rate of equity gains. That doesn’t mean you’ve lost value; it simply reflects a more sustainable pace.

Putting It in Perspective

Chances are, you still have significantly more equity than you did just a few years ago—and that gives you a strong advantage if you’re thinking about selling. Here’s the proof.

Zillow’s data shows that since March 2020, home prices nationwide have surged by an impressive 45%. That’s a remarkable increase.

In most markets, home prices are still climbing—just at a more moderate pace. Even in the metros areas seeing the largest declines (the ones grabbing headlines), the average dip is only around 4%.

So, what does that really mean? In the vast majority of areas, price growth continues steadily. And in the few places where values have eased slightly, the gains made over the past five years still far outweigh those minor pullbacks.

In short, these slight dips don’t come close to wiping out the substantial gains of recent years. Homeowners who’ve owned their properties for a while are still far ahead—by a wide margin—and that’s consistent across nearly every market.

Data from the Federal Housing Finance Agency (FHFA) illustrates this clearly. Looking at the broader, state-by-state picture, every single state has experienced price growth over the past five years. That means homeowners everywhere are sitting on significantly more equity than they had just half a decade ago (see graph below):

Chances are, if you’ve owned your home for more than a few years, you’ve built the kind of equity that used to feel out of reach before the pandemic. And if you decide to sell, that equity can give you the flexibility to move up, downsize, or make your next move with confidence.

If you’re worried that recent price dips could lead to something bigger, here’s some perspective from Jake Krimmel, Senior Economist at Realtor.com:

“The recent, modest declines in overall home values and total equity aren’t a red flag. While the market is normalizing, widespread price drops across the country are highly unlikely anytime soon.”

The recent slowdown in price growth isn’t something to fear—it’s a healthy sign of balance returning to the housing market after several years of record-breaking gains. And even with that moderation, most homeowners remain in an exceptionally strong financial position.

Bottom Line

Even though prices have softened slightly in a few areas, today’s homeowners are still holding on to near-record levels of equity—one of the strongest financial cushions in history. That equity not only boosts your net worth, but it can also open doors to new opportunities, whether you’re thinking about upsizing, downsizing, or investing in your next property.

If you’re curious about how much equity you’ve built—or just how far ahead you really are—it’s worth having a conversation with a trusted local real estate professional. They can help you get a clear picture of your home’s current market value and what that means for your next move. You might be pleasantly surprised by just how much your home has appreciated.