Remember that a home loan’s financial leverage can boost ownership profits over the mortgage’s life but also magnify the impact of price declines.
My trusty spreadsheet reviewed Cotality’s third-quarter report on homeowner equity, focusing on homes with mortgages and comparing home values with loan balances. Cotality tracked this measure of financial cushion for borrowers in 49 states (Vermont didn’t have enough data) and the District of Columbia.
Mortgaged homes across California lost an average $33,000 in equity in the year ended in September. That’s more than double the national decline of $13,000. Equity declined in 33 states as home values fell in many areas over the past year.
Florida had the biggest drop with average equity down $37,000. Next was the District of Columbia, off $36,000. After California, Washington state was off $32,000. Texas had the eighth-biggest dip, down $26,000.
The biggest gainers show the Northeast as the nation’s hottest housing market of late.
Connecticut’s average equity rose by $32,000 over the year; New Jersey was up $28,000; Massachusetts and Rhode Island were up $16,000; and Maine was up $14,000.
Slice of a big pie
Years of Golden State home-price gains dull the pain of the recent downswing.
Californians still have plenty of equity left, despite the 2025 slip: an average $603,000 per mortgaged home.
That’s slightly more than double the nation’s average equity stake of $299,000.
Only Hawaiians have more equity at $674,000. After California, Massachusetts came in at $476,000, Washington state at $431,000, and New Jersey at $408,000. Texas was No. 36 at $188,000, and Florida was No. 18 at $279,000.
The smallest equity was in Louisiana at $102,000, Oklahoma at $115,000, and Iowa at $121,000.
Taking all that remaining equity into account, the California decline looks modest on a percentage-point basis. It’s just a 5% drop, ranking 16th-worst among the states and slightly larger than the national 4% decline.
The biggest percentage tumbles were in Texas, Florida and Louisiana – each off 12% in a year, the District of Columbia, off 10%, and Arizona, off 9%.
Top gains, by percentage? Connecticut at 10%, then New Jersey at 7%, Maine at 4%, Rhode Island at 4%, and Massachusetts at 3%.
Who’s underwater?
One measure of potential mortgage problems is the number of borrowers who have no equity in their homes, which limits the staying power of “underwater” owners in the event of financial troubles.
Just 0.9% of California borrowers had no equity in the third quarter, by Cotality’s count. That tied Nevada for the nation’s best. Next were Massachusetts and Rhode Island at 1.1% and Hawaii at 1.2%.
Nationwide, 2.2% of mortgages were underwater. They were most common in Louisiana (6.9% of all homes), Iowa (5.2%), Mississippi and Oklahoma (4.9%), and South Dakota (4.7%). Texas was No. 30 at 2.4% and Florida was No. 18 at 1.9%.
For a little historical context, 37% of California mortgages were underwater in 2009’s fourth quarter as the Great Recession was demolishing the housing market. At the same time, 26% of homes nationwide had no equity.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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