Accessing home equity in times of financial need is becoming an increasingly difficult task for American homeowners, according to a recent economic research from Point. The analysis estimates that every year, almost 4.6 million homeowners who have mortgages undergo a labor market transition that could have a negative effect on their credit ratings and possibly prevent them from accessing traditional home equity lending choices. This amounts to an estimated $731 billion in “trapped” home equity overall.
Home equity has been a financial safety net for decades, assisting homeowners in handling life’s significant costs, such as medical bills and house improvements. However, the paper notes that two key changes in the post-pandemic economy—the normalization of non-traditional career choices and persistently high loan rates—are changing access to home equity.
“Millions of homeowners are facing a financial paradox: they’ve built up significant home equity but are unable to access it precisely when they need it most,” said Aaron Terrazas, Economist for Point. “With traditional home equity lending increasingly out of reach for many Americans, the industry is just starting to adapt to these new economic realities and develop innovative ways to provide homeowners with the financial flexibility they need precisely when they need it.”
In Summary:
- According to Point, approximately 9% of mortgaged homeowners lose their jobs, have their incomes cut, or become self-employed in a given year. These occurrences have the potential to reduce credit ratings and limit access to credit lines and home equity loans.
- The projected $731 billion in home equity held by homeowners who have experienced a negative credit shock may not be accessible to them because of credit limitations.
- The cost of borrowing against home equity is greatly increased by high interest rates, which reduces the viability of conventional choices like cash-out refinance.
- Credit-related impediments to home equity access have been made worse by the emergence of “jungle gym” occupations, which are defined by frequent job changes, gig labor, and self-employment.
The financial strains homeowners confront are further highlighted by recent job market trends. Over 275,000 job cutbacks have been announced by U.S. corporations and the federal government in 2025 alone, with reorganization initiatives leading to a major drop in the federal workforce. In light of the recent rapid changes in the economy, it will become more and more important to provide homeowners with flexible and easily accessible lending options in order to preserve their financial security.
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