5 Cities Where Homeowners Are Now Losing Equity

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Serious homeowner
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The signs of a cooling housing market suddenly are everywhere. And as the real estate market weakens, tappable home equity is disappearing.

Nationwide, tappable equity — which is defined as the amount of cash a homeowner can borrow against their home while maintaining a 20% equity stake — hit its 10th consecutive record high in the second quarter of this year, at $11.5 trillion, according to Black Knight’s latest Mortgage Monitor Report.

But after peaking in May, it now looks like a “sizable reduction” in tappable equity is coming for the third-quarter reading, Black Knight says.

In five metro areas, tappable home equity already has fallen significantly, dipping by double digits between April and July. Following are the metros where equity is disappearing fast.

5. Los Angeles

Home in Los Angeles
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How much tappable equity this metro lost from April through July: 10%

The halo around the City of Angels housing market is dimming as reality catches up with elevated prices.

Los Angeles is just one of several California communities where people are departing in droves in search of new places to call home, as we note in “People Are Fleeing These 10 Cities: Here’s Where They’re Moving.”

4. San Francisco

Homes in San Francisco, California
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How much tappable equity this metro lost from April through July: 14%

Formerly hot San Francisco has seen a dramatic shift, as we reported in “10 Housing Markets That Are Cooling Fastest.”

Nationwide, tappable equity was down 5% in June and July, according to Black Knight. As the firm notes:

“Keep in mind that of the roughly 275K borrowers who would fall underwater from a 5% price decline, more than 80% purchased their homes in the first six months of 2022 – right at what appears to have been the top of the market.”

3. San Diego

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How much tappable equity this metro lost from April through July: 14%

Home sellers are growing restless in San Diego. In July, sales dropped 43% year over year.

As a result, San Diego is now one of the “10 Housing Markets With the Most Sellers Dropping Prices.”

2. Seattle

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How much tappable equity this metro lost from April through July: 18%

Last month, we noted that Seattle was one of “7 Housing Markets Where Bidding Wars Are Disappearing.”

A correction likely was inevitable in the Emerald City, and now appears to be taking hold.

1. San Jose, California

Homes in San Jose, California
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How much tappable equity this metro lost from April through July: 20%

Black Knight notes that San Jose has seen the most significant housing pullback in the country, with the average home price plunging 10% in just three months.

At the same time, tappable equity here has dropped double that amount.