$731 Billion In Home Equity Expected To Be Locked-In Due To "Negative Credit Shocks" Homeowners Will Face This Year

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April 9, 2025 – A new economic analysis from Point highlights a growing challenge for American homeowners: accessing their home equity in times of financial need. According to the report, approximately 4.6 million homeowners with a mortgage experience a labor market shift each year that potentially negatively impacts their credit scores—potentially locking them out of traditional home equity lending options. In total, this represents an estimated $731 billion in "trapped" home equity.

For decades, home equity has served as a financial safety net, helping homeowners manage life’s major expenses, from home renovations to medical bills. However, the report identifies two fundamental shifts in the post-pandemic economy that are reshaping access to home equity: persistently high interest rates and the normalization of non-traditional career paths.

Key Findings:

• Point estimates that roughly 9% of homeowners with a mortgage experience a job loss, pay reduction, or transition to self-employment in a typical year. These events can lower credit scores and restrict access to home equity loans and lines of credit.
• Homeowners facing a negative credit shock collectively hold an estimated $731 billion in home equity that they may be unable to access due to credit constraints.
• High interest rates significantly increase the cost of borrowing against home equity, making traditional options like cash-out refinancing less viable.
• The rise of "jungle gym" careers—characterized by frequent job transitions, gig work, and self-employment—has increased financial volatility, further exacerbating credit-related barriers to home equity access.

Regional Impact:
The report finds that homeowners across all regions of the U.S. are affected at similar rates:

• Northeast: $149 billion in "locked-in" home equity
• South: $247 billion
• Midwest: $121 billion
• West: $284 billion

“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.”

Recent labor market trends further highlight the financial pressures homeowners face. In 2025 alone, U.S. employers and the federal government have announced over 275,000 job cuts, with significant reductions in the federal workforce due to restructuring efforts. Economic conditions have evolved rapidly in recent weeks, and ensuring flexible and accessible lending solutions will be increasingly critical for maintaining financial stability among homeowners.

Read the entire report on negative credit shocks here. 

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