California homeowners are sitting on an extraordinary amount of wealth.
According to a new report from Cotality, the average California homeowner with a mortgage has approximately $627,000 in home equity.
That’s the second-highest average in the United States, trailing only Hawaii, and more than twice the national average of approximately $310,500.
For homeowners who purchased years ago and have watched California home values appreciate, the amount of wealth accumulated inside their homes may be significantly larger than they realize.
What Is Home Equity?
Home equity is the difference between the current value of your property and the amount you still owe on your mortgage.
For example, if your home is worth $1 million and you owe $400,000 on your mortgage, you have approximately $600,000 in equity.
Equity can grow in two primary ways: as you pay down your mortgage and as the value of your property increases.
Over decades, that combination can turn a homeowner’s property into one of their most valuable financial assets.
California Homeowners Hold $4.1 Trillion in Equity
The statewide numbers are even more striking.
California has approximately 6.6 million homes with mortgages, and those properties collectively represent an estimated $4.1 trillion in homeowner equity.
That’s nearly 23% of all homeowner equity in the United States.
Despite California representing only one state, its homeowners hold almost one-quarter of the nation’s mortgaged homeowner equity.
The Wealth Gap Between Homeowners and Renters
Homeownership also continues to play an important role in household wealth.
Federal Reserve data shows the median homeowner has a net worth of approximately $396,500, compared with approximately $10,410 for the median renter.
Of course, buying a home isn’t automatically the right financial decision for everyone, and home equity isn’t the only reason for that difference. Homeowners and renters can differ substantially in age, income, savings, and other financial characteristics.
But the numbers illustrate why owning real estate has historically been one of the primary ways American households have accumulated wealth over time.
What Can Homeowners Do With Their Equity?
Having $627,000 in equity doesn’t mean having $627,000 sitting in a bank account.
Equity is tied to the property, and accessing it typically requires selling the home, refinancing, or borrowing against it.
For homeowners considering their next move, understanding their equity position can nevertheless be extremely valuable.
It can affect how much you could put toward your next home, whether downsizing makes financial sense, your ability to purchase an investment property, or simply how much wealth you’ve accumulated since buying.
How Much Equity Do You Have?
The statewide average is interesting, but real estate is local.
A homeowner who purchased in Orange County, Los Angeles County, or another Southern California market several years ago could have a very different equity position depending on when they purchased, what they paid, their remaining mortgage balance, and how their neighborhood has performed.
If you’re curious what your home could sell for today and approximately how much equity you have, contact our team for a current home value and equity analysis.
Source: Cotality via the Orange County Register.
