American homeowners are facing a new reality: for the first time in over ten years, home equity has decreased. Data from CoreLogic reveals that during the first quarter of 2023, the average homeowner's equity dropped by 1.9% compared to the same period in 2022, landing at $274,070. This marks the first annual decline since the first quarter of 2012, a period when the housing market was still recovering from the Great Recession.

This decline translates to a collective loss of $108.4 billion in home equity among mortgaged homeowners. Home equity, the difference between a property's market value and the outstanding mortgage balance, is directly influenced by home prices. The recent slowdown in the housing market, driven by increased mortgage rates and limited inventory, has put downward pressure on home values.

Image: A new housing development exemplifies the changing landscape of the housing market.

While the national median home price saw a 1.7% year-over-year drop to $388,800 in April, there's a glimmer of hope. Average homeowner equity actually increased by 0.9% between the fourth quarter of 2022 and the first quarter of 2023. CoreLogic's chief economist, Selma Hepp, attributes this to the acceleration of monthly home price growth in early 2023. She emphasizes the close relationship between home equity trends and home price fluctuations.

Although equity is down, the number of "underwater" homeowners (those owing more than their home's worth) remained relatively stable at 1.2 million homes, or 2.1% of mortgaged properties. However, this figure does represent a 4% increase compared to the first quarter of 2022. Regionally, Washington, California, and Utah experienced the steepest average home equity declines, with decreases of $74,300, $59,600, and $37,700, respectively.