Home Equity Pulls Back Slightly in 2025 Q3 | Why Phoenix Homeowners Are Still in a Strong Position

U.S. Home Equity Dips From Record Highs in 2025 Q3 | What It Means for Phoenix Homeowners

By Scott Bryant
Jan 13, 2026

In the third quarter of 2025, new Flow of Funds data from the Federal Reserve showed a modest shift in the national housing landscape. While headlines may focus on the fact that home equity dipped from record highs, the real story, especially here in the Phoenix Metro, is one of strength, stability, and long-term opportunity.

Here’s what homeowners, buyers, and sellers in Phoenix need to understand.

The Value of Homes Declined Slightly From Record Highs

In 2025 Q3, the total value of owner-occupied real estate in the U.S. fell by approximately $360 billion, landing at over $48 trillion. On a year-over-year basis, aggregate real estate values declined about 1.1%, or $511 billion.

To put that into perspective, the total value of real estate has more than doubled since mid-2016.

Phoenix Metro Context

In Phoenix, this easing looks more like a normalization, not a downturn. After several years of aggressive appreciation, many local submarkets are seeing price stability rather than price erosion. Desirable neighborhoods, well-located homes, and properties priced correctly continue to attract strong demand.

This is exactly what a healthier, more sustainable market looks like.

Mortgage Debt Continued to Grow

During the third quarter of 2025, mortgage debt reached a new record high of $13.6 trillion, increasing by $108 billion from the prior quarter and 2.8% year over year.

While mortgage debt growth has slowed compared to the peak borrowing years of 2021–2022, it is still expanding at a pace slightly faster than the 2017–2019 pre-pandemic norm.

What This Signals Locally

In Phoenix, buyers are still purchasing homes, just more intentionally. We’re seeing:

• More conservative leverage
• Stronger underwriting
• Buyers prioritizing long-term ownership over speculation

This supports market stability and reduces the risk of forced selling.

Home Equity Fell Slightly | But Remains Exceptionally Strong

With rising mortgage debt and slightly declining real estate values, aggregate home equity fell by $469 billion quarter over quarter, landing at $34.4 trillion nationwide.

Home equity now stands at 71.6% of total real estate value.

While this is the lowest level since 2023 Q4, it remains higher than at any point between 1961 and 2023.

Why This Matters for Phoenix Homeowners

Phoenix homeowners are sitting on substantial equity cushions. Even households that purchased in the last few years generally remain well-positioned, especially compared to previous housing cycles.

It’s also important to note:

These figures represent aggregate equity. Individual households may have significantly more—or less—equity depending on purchase timing, financing, and market location.

Home Equity Reshapes Today’s Housing Context

Despite the slight pullback, today’s elevated home equity continues to act as a powerful buffer for both homeowners and the broader economy.

Here’s how resilient the system remains:

• A 10% drop in home values would still leave homeowner equity at 68.4%, comparable to mid-2023 levels
• A 20% drop in home prices would result in equity of 64.5%, similar to early 2022
  

In other words, even under stress scenarios, the housing market remains structurally stronger than in prior decades.

What This Means for the Phoenix Metro Market

From our perspective at Bryant Real Estate Group, this data reinforces what we’re seeing on the ground across Phoenix:

• This is not a distressed market
• This is a market shifting from rapid appreciation to strategic decision-making
• Equity remains a major advantage for sellers
• Buyers have more leverage, but must act decisively on well-priced homes

For sellers, equity provides flexibility and options.
For buyers, normalization creates opportunity.
For homeowners, this is a reminder of how much wealth has been built over the last decade.

The Bottom Line

Yes, U.S. home equity dipped slightly from record highs in 2025 Q3.
No, this does not signal a housing crisis.

In Phoenix, the fundamentals remain strong, equity levels are historically high, and the market is moving toward balance, not breakdown.

If you want to understand how your specific home, your neighborhood, or your equity position fits into this evolving market, that’s where local expertise matters most.

Bryant Real Estate Group
Market clarity. Strategic guidance. Phoenix expertise.