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September 21, 2023 • 8 minutes
Even with home prices falling over the last year in many locations, home prices remain high. And, if you have owned a house for more than 3 years, you have probably seen measurable appreciation. Let’s explore a bit about home equity and why it is so important if you are anything but the upper class.
Home equity is the difference between your home’s market value and the amount you owe on your mortgage.
Home equity plays a significant role in wealth gains for many middle-class and lower-income individuals and families. It represents a form of forced savings as homeowners pay down their mortgages.
According to the latest data from real estate data firm CoreLogic, the average U.S. homeowner now has more than $274,000 in equity — which is down from last year, but still an historically high average.
And, the National Association of Realtors, the median price of a house in the United States is worth $190,000 more than it was a decade ago.
In the realm of wealth and prosperity, disparities loom large. While the chasm between the investable assets of the very rich is vastly larger than what the majority of the population possesses, there is somewhat less of a divide on home equity.
Among income groups, low-income households typically own a home with a value of $65,000 lower than the value of homes owned by middle-income households. However, low-income owners spend more years in their properties. The average length of owning their home was 19 years compared to 16 years for middle-income and 14 years for upper-income households in 2021.
Median home value by income level:
According to data from the Federal Reserve, compiled by Ben Carlson of A Wealth of Common Sense, the disparities in home equity are vastly smaller than the differences in stock holdings by household wealth. The top 1% own 54% of stocks, but only 14% of the home equity and the bottom 50% have .6% of stocks but 13.1% of home equity.
In Q4 2021 (the latest data available) the:
While home equity can be a valuable source of long-term wealth, it’s essential to strike a balance between homeownership and diversifying your investments to mitigate risks and ensure a well-rounded financial strategy.
Home equity is a valuable source of wealth that can be tapped in a variety of ways to help with retirement or other financial goals. However, home equity is not the most flexible source of wealth. There are downsides to relying on home equity, including:
Liquidity: As an illiquid asset, converting home equity into cash can be a convoluted and sometimes expensive process.
Maintenance and costs: Homeownership comes with ongoing expenses, including property taxes, homeowners insurance, maintenance, repairs, and utilities. These costs can be substantial and impact your overall financial situation.
Market risk: The value of your home is subject to market fluctuations. While real estate can appreciate, it can also depreciate, especially in economic downturns or in areas with declining property values.
The bottom line though is that wealth in the form of home equity is much better than no wealth at all.
You have lots of options for how and why to tap your home equity. And, any of the following options can be modeled as a “what if” scenario in the Boldin Retirement Planner.
Let’s start with why you might want to tap home equity, then explore how:
Tapping into home equity refers to using the value you’ve built up in your home to access funds for various purposes. Homeowners may choose to do this for several reasons, depending on their financial needs and goals. Here are some common reasons why people tap into home equity:
You have option, including:
Explore 5 ways to tap home equity in more detail or run what if scenarios in the Boldin Retirement Planner.
No matter where you land on the income spectrum, your home can represent both stability and opportunity. Understanding how much value it holds—and what you can or should do with that value—can shape everything from your sense of security to your long-term financial strategy. But remember, real confidence in retirement planning doesn’t come from guessing. It comes from knowing. That’s why we built tools like the Boldin Retirement Planner to help you see the big picture clearly, make smart trade-offs, and build a future that feels secure and sustainable.
Want to explore your own numbers? Start running the scenarios that matter most to you—and take the guesswork out of your plan.
A: According to national data, older adults typically hold the majority of their net worth in home equity. In many cases, retirees have built up six figures or more—often surpassing their investment savings. However, how much is considered “average” depends heavily on home value, location, and mortgage balance.
A: In many cases, yes. Your property can be a source of flexibility, either through downsizing, a reverse mortgage, or tapping into rental income. That said, it’s essential to evaluate how it fits with your broader financial goals and risk tolerance. Home equity can be a cushion, but it’s not always liquid.
A: Your home’s value is what it would likely sell for today on the market. Equity, on the other hand, is what you truly own—your home’s value minus what you still owe on your mortgage. Equity grows over time as you pay down your loan or your home appreciates.
A: Home equity is often a retiree’s largest asset, especially for those in the middle or upper-middle class. If you’re 5–10 years from retirement, now is the time to evaluate whether your current home will support your future goals. Consider whether paying off your mortgage, refinancing, or downsizing could help you maximize flexibility later.
A: Downsizing can free up substantial equity and reduce living expenses—but timing and planning are key. Evaluate current market conditions and be realistic about future home costs, including taxes, insurance, and maintenance. A smaller home doesn’t always mean smaller expenses, especially if you’re moving to a more expensive area.
A: Relocating can be a smart move if your current home has appreciated and you’re headed somewhere with a lower cost of living. However, factor in all lifestyle trade-offs—like proximity to family, access to healthcare, and weather—before cashing out and moving. Sometimes a smaller gain in equity offers a bigger improvement in quality of life.
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Your home is a valuable asset. It is also a powerful financial tool for retirement. Explore 5 ways to use your home equity. Read now…
