Buffalo, N.Y. (WBEN) - A recent study shows that sky-high home prices and low pandemic-era mortgage rates have seen home equity skyrocket since 2020, which is benefiting a large number of homeowners.
According to Bankrate, home equity has grown a whopping 142% nationwide over the last five years, with a 4.2% increase just over the last year. While not every state has seen a book in home equity, New York State was able to see a +74% increase in home equity between 2020 and 2025.
"We've seen enormous gains in home values, which translate into enormous benefits in home equity for those who have owned, and seeing their home price appreciate," said Stephen Kates with Bankrate in an interview with WBEN.
One of the interesting findings Kates found with the study is the amount of debt people have in their home, relative to the home value, has shrunk precipitously, which is a good thing.
"That's something that puts households in a better financial position as we go into a time when the economy might get a little rockier," Kates said. "You compare that to sometime like pre-2008, pre-great financial crisis time when people were leveraged to the hilt. That's not the position we're in today, and that's a very good thing."
When looking specifically at Buffalo, Kates says the city has more affordable homes than many other parts of country and the state.
"Cities like Buffalo, or states like West Virginia, which actually ended up being the highest percentage change in home equity value over the last five years, more affordable locations are drawing people in who want to own and want to potentially retire in those locations, because they can do so affordable," Kates said.
Peter Hunt from Hunt Real Estate feels the growth in home equity has been a good thing in Western New York.
"That's the principal source of transfer of wealth in this society is from a single family home. So I think it's a great thing for the future of our community," Hunt said with WBEN.
Hunt says there are three ways that home equity is benefiting families locally.
"No. 1, they own a home, and they own more of a home. They have a higher percentage of equity in their home. No. 2, if they choose to sell it, they can reap a significant benefit. And No. 3, if they don't sell it and they pass it on to their children, they provided them with an asset that they otherwise would not have," Hunt explained.
Hunt has regularly seen how strong home equity values are, and that's poured out into market statistics across the board.
"The fact of the matter is we've enjoyed a good run here in Upstate New York, in terms of equity and sale prices. Some would argue that it's too good, and it's making it very difficult for first time home buyers to get into the market," Hunt noted.
Kates also acknowledges that the benefits to those who own a home are to the detriment of those who want to own that home, because the home price appreciation makes it that much harder for people to get onto the property ladder.
"We have very high home prices today, we also have very high mortgage rates. The combination of those has made home affordability really at its almost worst position in decades. So this is something that while it's great for those who own the home and can potentially tap that equity as part of their household well, those who want to own a home or get on the home ladder are finding it exceptionally difficult, and are having to look to other options either to own a home or to continue to rent," Kates said.
If there is any sign of good news is home prices nationally are starting to ease, especially in some of the major metro areas where there's been more builds, leading to the interest in new home purchases starting to wane. Kates feels that's going to soon trickle out to the rest of the country.
"It's very possible we may start to see, on a national level, that home prices are stagnant or falling. And if that combines with falling mortgage rates, then that's going to make it much, much easier for people to start to buy," Kates said. "Now, we've got a long way to go to get back to the prices that we were at in 2022 or 2020, from a home price value, but any breaks on mortgages or prices does make it easier."
For numbers to cool off, Hunt believes there would have to be some kind of significant gyration in the economy.
"Continued high inflation or higher inflation, let's say the Federal Reserve does not lower rates, perhaps they raise rates, that would be reflected in all financial markets negatively, and certainly housing would be affected by that," Hunt noted. "The difference with housing, though, is we have a chronic under supply right now because of the rapid increase in interest rates that took place in March of 2022 when the Federal Reserve tightened things up. As a result of the 10-year T bill, when they show us the lower rates a year later, what happened was the mortgage rates actually went up, because the benchmark 10-year T bill, which we priced mortgages off of, continued to rise."
Hunt adds it's been relatively stable for a long time, and it's expected for it to remain stable for a while longer.
"As a matter of fact, we learned that the mortgage interest rate, a 30-year fixed rate, kind of the vanilla product, is now at its lowest rate this year. Those are good things, but the fact of the matter is if mortgage rates did come down, what we would see is prices would continue to go up," Hunt said. "We've seen a moderation in the rate of increase in prices throughout Upstate, but it hasn't gone to zero. In order for it to get to zero, there'd have to be some significant gyrations in the economy."