In the third quarter of 2025, the Flow of Funds data from the Federal Reserve showed that the total value of owner-occupied real estate fell by around $360 billion in 2025Q3 to land at a total of over $48 trillion. Home equity fell from previous all-time highs to $34.4 trillion. Mortgage debt continued to grow, hitting a new record high of $13.6 trillion.
Here’s what we learned
The value of homes declined from record highs
In the third quarter of 2025, the total value of owner-occupied real estate, the value of all homes owned by those living in them, fell $360 billion from the previous quarter. On a year-over-year basis, aggregate real estate values have fallen about 1.1% (or by $511 billion). Taking the longer view, the total value of real estate has more than doubled since mid-2016.
New mortgage debt continued to grow
During the third quarter of 2025, mortgage debt reached a new high total of $13.6 trillion, reflecting an increase of $108 billion from the previous quarter and 2.8% from the same period the previous year. The annual growth in mortgage debt was slightly faster than what was typical in 2017–19, despite being less than half of what was typical from mid-2021 to the end of 2022.
Home equity fell slightly
With rising mortgage debt and falling real estate values, aggregate home equity declined by $469 billion since last quarter and now stands at 71.6%. Equity as a share of total value is at its lowest levels since 2023Q4, but remains greater than at any other time between 1961 and 2023.
It’s worth noting that the trend observed here is for the aggregate or total value of equity versus real estate value. For any individual household, there will be more or less than this amount.
Home equity reshapes today’s housing context
With home values at a record high, today’s elevated home equity provides a significant cushion for both homeowners and the broader economy. Even if homes were to lose 10% of their value overnight, homeowner equity would still be at 68.4%, similar to mid-2023. Using this framework, a 20% drop in home prices would leave homeowner equity at 64.5% of real estate value, around early 2022 levels.
Find the full Flow of Funds data.
