Overview
American homeowners are wealthier than ever on paper, yet their home equity remains largely trapped. Despite record-high values, there is a massive disconnect between owning that wealth and being able to use it.
- Homeowners are sitting on $11 trillion in tappable equity, yet only 3% was accessed last year.
- Wealth is at an all-time high: $300k average equity per borrower.
- Most borrowers have enough "trapped" cash to pay off all other debts, yet they feel financially squeezed.
The $11 trillion in tappable equity held by U.S. homeowners represents a massive economic paradox.
According to Cotality’s Homeowner Equity Report, the average borrower holds about $300,000 in equity, reflecting the massive scale of homeownership as the nation’s second-largest asset class after publicly traded stocks.
Despite this staggering wealth, the capital remains a "dormant engine."
Even with lending hitting its highest level since the Great Recession, homeowners are barely scratching the surface of their wealth. Total home equity lending in 2025 left more than 97% of the nation’s tappable equity sitting idle.
In an increasingly AI-shaped job market with persistently high living costs, this wealth should serve as a vital buffer for household consumption. However, with the consumer sentiment sitting 50% below where it was in 2020, it’s clear that paper wealth isn’t translating to a sense of security.
If economic pressures worsen, the trillions in home value gained since 2020 could act as a financial safety net; but it is more likely they will sit idle.
Total tappable equity amongst US borrowers, 2010 Q1- 2025 Q4
Source: Cotality Home Equity Report Q4 2025
The mismatch: Who is truly trapped?
The scale of this multi-trillion dollar ‘sleeping giant’ is immense, yet its distribution creates a barrier to resilience.
Tappable equity is heavily concentrated among older, wealthier households, who are historically the least vulnerable to market downturns.
This creates a geographic and generational divide: those who possess the wealth are rarely those who require liquidity.
California alone accounts for 25% of the nation’s tappable equity, yet it represents only 12% of active HELOC balances. Meanwhile, the younger workforce—those most susceptible to hiring slowdowns—generally have zero equity to draw upon.
“We are looking at a fundamental barrier to economic resilience," notes Thom Malone, Principal Economist at Cotality. "The wealth is there, but it’s locked behind the walls of stable, older households. This leaves a massive portion of the younger population exposed to economic shocks."
Share of nationwide tappable equity vs. share of nationwide tapped equity by state, Q4 2025
Source: Cotality public records data and Home Equity Report, 2025
Why so little is tapped
Homeowners avoid tapping into their equity due to a mix of psychological and mathematical hurdles, including debt anxiety, complex loan jargon, and refusal to jeopardize low fixed-rate mortgages.
Since 2022, the golden handcuffs—where owners cling to 4% mortgage rates—have made secondary borrowing feel like a losing proposition.
Beyond personal hesitation, the banking system acts as a gatekeeper built for the "ideal" borrower, leaving many "house rich but cash poor."
Gig economy workers, freelancers, and recent retirees may have significant equity in their homes—sometimes in the six-figure range—but they frequently fail to meet the strict credit score and income verification requirements set by traditional lenders.
Such a structural mismatch keeps the very people who need liquidity most locked out by the very institutions meant to provide the key.
Total amount HELOCs and closed-end second mortgages, 2010 Q1- 2025 Q4
Source: Cotality public records data, 2025
Activating the dormant engine
For the vast majority of Americans, this asset remains a 'locked vault'—not because the wealth isn't there, but because the tools to reach it haven't evolved.
Historically, the primary way to unlock this wealth was simple: sell the home. However, with residential mobility slowing, traditional methods like selling may no longer be viable for many. This market stagnation is only amplified by elevated interest rates that are piling hundreds of dollars onto monthly payments.
"Price has become a sticking point. Younger buyers are looking for affordability and current home prices continue to bar them from the market," says Cotality's Principal Economist Archana Pradhan. "As market uncertainty builds, the job market softens, and home prices remain high, there will be fewer buyers but also more incentive to tap into stored equity."
One avenue does remain open. By utilizing specialized insights and mortgage banking technology, originators can help homeowners access trapped equity1 and implement targeted solutions to unlock it.
But if the financial industry fails to modernize how we access this capital, this massive cushion will remain a dormant resource at the very moment the American household needs an active engine.
1 Tappable equity refers to the amount of equity a homeowner has such that they could take it out and maintain a 0.8 loan-to-value ratio. For example, on a home worth $1,000,000 owned free and clear, the owner would have $800,000 of tappable equity. If they had a $300,000 mortgage on the home, that would be reduced to $500,000.
