Record home equity is the biggest real estate headline of the fall, and on paper, it’s great news. American homeowners have never been wealthier in their houses. But if you’ve talked to a lender lately, you already know the other half of the story: the same dollar buys less house than it did a year ago.
That’s the strange split we’re living in right now. Record home equity on one side, shrinking purchasing power on the other. As a Turlock Realtor for more than 20 years, I’m getting this question almost daily: “My house is worth more than ever, so why can’t I afford to move?”
In this post, I’ll break down what’s driving record home equity, why buyer purchasing power is falling at the same time, and — most importantly — what homeowners, move-up buyers, and first-time buyers in Turlock and Stanislaus County can actually do about it.
What “Record Home Equity” Actually Means in 2026
Let’s start with the numbers, because they’re genuinely historic. According to Cotality’s Homeowner Equity Insights Report released September 10, 2026, U.S. homeowners with a mortgage held about $17.9 trillion in equity in the second quarter of 2026. That’s the record home equity figure everyone is quoting.
The average homeowner with a mortgage now holds roughly $310,000 in housing wealth, and the average loan-to-value ratio sits around 44%. Only about 2.1% of mortgaged homes are underwater. In plain English, most owners owe far less than their homes are worth.
Separately, ICE’s Mortgage Monitor put mortgage-holder equity at about $18 trillion for the same quarter, as reported in a Stacker analysis of ICE and ATTOM data. Different data sources, same conclusion: record home equity is real, and it’s big.
Tappable Equity: The Part You Can Actually Use
Not all of that wealth is usable. Lenders generally require you to keep some equity in the home, usually 20%, so the portion you could borrow against is called tappable equity.
Cotality estimates there’s about $11.5 trillion in tappable equity nationwide as of Q2 2026. That’s an enormous pool of money sitting inside people’s walls — and most of it isn’t being touched.
Why Record Home Equity Isn’t the Same as Cash
Here’s the catch I remind every client of: equity is not money in your checking account. It only becomes spendable when you sell, refinance, or borrow against it. And every one of those options costs more today than it did a few years ago.
That’s exactly where the second half of this story — shrinking purchasing power — comes in.
Why Purchasing Power Is Shrinking Even as Equity Soars
Record home equity tells you what homeowners own. Homebuyer purchasing power tells you what a buyer can afford. Right now, those two numbers are moving in opposite directions, and interest rates are the main reason.
Mortgage Rates Just Crossed 7% Again
According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed rate averaged 7.03% as of September 24, 2026. That’s up from 6.95% the week before and well above the 6.30% average from one year earlier. The 15-year fixed climbed to 6.42%.
Those mortgage rates in September 2026 have climbed steadily all month. Freddie Mac’s weekly readings went from 6.71% in early September to 7.03% by the end of the month. For a buyer, that’s a painful move in just four weeks.
The Fed Rate Hike of 2026
The bigger shift came on September 16, 2026. The Federal Reserve raised its benchmark rate by a quarter point to a range of 3.75% to 4.00%, citing inflation that remains elevated. It was the first increase since 2023.
That Fed rate hike in 2026 didn’t directly set mortgage rates — those follow the 10-year Treasury more closely — but it signaled that borrowing costs may stay high for a while. CNBC reported that most Fed officials see another increase as possible before year’s end.
Here’s What That Does to a Buyer’s Budget
Numbers make this real, so let’s run them. Imagine a buyer who can comfortably spend $2,500 a month on principal and interest (before taxes and insurance).
- At a 3.0% rate (common in 2020–2021), that $2,500 supports a loan of about $593,000.
- At 6.30% (a year ago), the same payment supports about $404,000.
- At 7.03% (today), it supports only about $375,000.
That’s roughly $29,000 in lost borrowing power in just one year — and more than $200,000 compared with the low-rate era. Same paycheck, same monthly budget, dramatically less house.
This is what “less purchasing power” really means. The buyer didn’t get poorer. The money just got more expensive.
Housing Affordability in California: Where Stanislaus County Fits
Statewide, the picture is tough. The California Association of REALTORS® Q2 2026 Housing Affordability Index found that only 19% of California households could afford the $916,750 median-priced single-family home. The minimum qualifying income was about $228,400.
Housing affordability in California actually improved slightly from a year earlier, but it slipped from Q1 2026 as rates climbed back up. C.A.R. noted affordability declined in 44 of the 53 counties it tracks compared with the first quarter.
Stanislaus County Home Prices and Affordability
Here in the Valley, we’re in a much better spot than the coast — but we’re not immune. According to that same C.A.R. report, 32% of Stanislaus County households could afford the median-priced home in Q2 2026, down from 34% in Q1.
Stanislaus County home prices had a median of about $489,240 in the second quarter. The monthly payment on that home, including taxes and insurance, was roughly $3,050, requiring a minimum income of about $122,000. Merced County, just south of us, came in at 31% affordability with a median around $419,440.
Remember, C.A.R.’s math used an average effective rate of 6.54%. With rates now above 7%, the real-world numbers for September are likely a bit worse.
The Turlock Real Estate Market Right Now
Zooming in further, Redfin’s Turlock data shows a median sale price of about $509,663 for August 2026, up 1.5% from the year before. So prices in the Turlock real estate market are holding steady — not soaring, but not falling either.
Put that together with today’s rates, and here’s the reality: on a Turlock home at about $510,000 with 20% down, principal and interest alone runs around $2,720 a month at 7.03%. At a year-ago rate of 6.30%, it would’ve been about $2,520. That’s $200 more every month for the same house.
That’s the local version of record home equity meeting shrinking purchasing power. Owners feel rich. Buyers feel squeezed.
The Mortgage Rate Lock-In Effect: Why Owners Aren’t Moving
If homeowners have record home equity, you’d think they’d be selling and moving up. Many aren’t — and the reason has a name: the mortgage rate lock-in effect, sometimes called “golden handcuffs.”
Picture a Turlock homeowner who refinanced into a 3% loan in 2021. Their house has gained a lot of value, so they have strong equity. But if they sell and buy a similar home, they’d swap that 3% loan for one above 7%. Even with a big down payment, their monthly payment could jump by hundreds or even more than a thousand dollars.
Cotality’s economists noted that the owners with the most housing wealth are often the least likely to tap it. They tend to have low rates, strong cash flow, and no pressing reason to move. That’s a big part of why inventory stays tight.
A Growing Equity Gap Between Recent Buyers and Long-Time Owners
Record home equity isn’t spread evenly. Cotality found that people who bought in 2020 hold about $86,000 more equity on average than those who bought in 2023 — and that gap may never close.
Meanwhile, ICE counted roughly 813,000 borrowers who owe more than their homes are worth, a 44% jump from a year earlier. Most of them bought between 2022 and 2025, often with FHA or VA loans and small down payments. So while the national headline is record home equity, some recent buyers have very little cushion.
How Homeowners Are Using Record Home Equity Without Selling
Instead of selling, a lot of owners are borrowing against their homes while keeping their low first mortgage in place. That’s driving a surge in second-lien lending.
The HELOC Comeback
A home equity line of credit, or HELOC, lets you borrow against your equity as needed, much like a credit card secured by your house. You keep your existing low-rate first mortgage untouched.
Cotality reported that new HELOCs and closed-end second mortgages rose nearly 20% from Q1 to Q2 2026, reaching about $93.7 billion. Even so, that’s less than 0.1% of all tappable equity. ICE also found that second liens made up 54% of all equity withdrawals in early 2026 — the strongest first-quarter showing in 18 years.
I see Turlock homeowners using HELOCs for things like adding a bedroom, building an ADU, or finishing a backyard instead of moving. It’s a way to “move up” without leaving your low-rate loan behind.
Cash-Out Refinance: Usually Not the Move Right Now
A cash-out refinance replaces your entire mortgage with a new, larger loan and gives you the difference in cash. It’s a great tool when rates are falling. When rates are above 7% and your current loan is at 3%, it usually doesn’t make sense.
You’d be trading a cheap loan on your whole balance for an expensive one just to access part of your equity. For most owners with a low rate today, a HELOC or home equity loan is the smarter path. Always run the numbers with a trusted lender before deciding.
A Word of Caution on Tapping Equity
Record home equity can make it tempting to borrow freely. But HELOCs usually carry variable rates, and with the Fed hiking again, those rates could rise. Borrow for things that add value or improve your life long-term — not for short-term spending. Your home is on the line.
What Record Home Equity Means for Move-Up Buyers
If you’re one of the many Turlock homeowners thinking about a bigger house, here’s the honest picture.
The good news is that record home equity gives you a powerful down payment. A large down payment shrinks your new loan, which helps offset today’s higher rates. Some move-up buyers can even put 30% to 50% down, which makes a big difference in the monthly payment.
A Simple Move-Up Example
Here’s a hypothetical example to show how this works. Say a Turlock family bought a home for $350,000 in 2020, and their home is now worth around $510,000. After paying down their mortgage for six years, they might have roughly $250,000 or more in equity.
If they sell and use about $220,000 (after selling costs) as a down payment on a $650,000 home, they’d need a loan of about $430,000. At 7.03%, principal and interest would run close to $2,870 a month. That may be very doable — or it may not — depending on their current payment, income, and goals.
The key is to compare the total monthly cost of the new home against your current housing payment, not just the price tags. I help clients do exactly this before they ever list.
Timing the Sale and Purchase
The other challenge for move-up buyers is timing. Most people need to sell first to unlock that record home equity. In a tight Turlock market, that raises the question: where do you live in between?
Options include a contingent offer, a rent-back after closing, or a bridge loan that lets you borrow against your current home temporarily. Each one has trade-offs, and the right choice depends on your situation. If you’re weighing a sale, my guide to selling your home in Turlock walks through my step-by-step process.
What Shrinking Purchasing Power Means for First-Time Homebuyers in Turlock
For first-time homebuyers in Turlock, record home equity doesn’t help directly. You don’t have equity yet. What you do feel is the full weight of lower purchasing power.
But there’s a silver lining here too. Because many owners are locked in, the buyers who are active face somewhat less competition than in the frenzy of 2021 and 2022. And Stanislaus County remains far more affordable than most of California.
Practical Steps to Stretch Your Budget
Here’s what I recommend to first-time buyers right now:
- Get fully pre-approved, not just pre-qualified. Rates are moving week to week, so know your real number.
- Ask about seller credits. Some sellers will contribute toward your closing costs or a rate buydown.
- Look into a temporary or permanent buydown. Paying points or using a 2-1 buydown can lower your early payments.
- Explore down payment assistance. California and local programs can help qualified buyers.
- Shop multiple lenders. Freddie Mac regularly points out that comparing quotes can save buyers thousands.
- Consider homes that need light cosmetic work. They often sell for less and have fewer competing offers.
Should You Wait for Rates to Drop?
This is the most common question I hear. The honest answer: nobody knows where rates are headed next. The Fed has signaled it could raise rates again, and economists are split.
If you find the right home at a payment you can handle, buying now and refinancing later — if rates fall — is one strategy many buyers use. Waiting can work too, but if rates drop sharply, more buyers flood back in, which can push prices up. There’s no perfect answer, only the one that fits your budget and timeline. If you’re relocating here, my moving to Turlock resource page is a great starting point.
What Record Home Equity Means for Turlock Sellers
If you’re thinking about selling, record home equity is working in your favor. Most Turlock homeowners who bought before 2022 are sitting on meaningful gains.
But shrinking buyer purchasing power means you need to price carefully. Buyers are payment-shoppers right now. A home that’s even slightly overpriced sits, and homes that sit often end up selling for less than if they’d been priced right from day one.
How to Sell Smart in This Market
A few strategies I use with sellers right now:
- Price to the payment, not just the comps. Think about what today’s buyer can actually afford monthly.
- Offer a rate buydown instead of a price cut. A seller-paid buydown can lower a buyer’s payment more than an equal price reduction.
- Present the home well. Clean, repaired, and well-photographed listings stand out when buyers are cautious.
- Know your net. Understand exactly how much record home equity you’ll walk away with after costs.
Want to know where you stand? Request a free home valuation in Turlock through my home page, and I’ll prepare a personalized Comparative Market Analysis based on recent local sales.
Will Purchasing Power Recover? What to Watch
Record home equity is likely to stay near historic highs as long as prices stay stable. Cotality’s modeling suggests that even a 5% price drop would push only a small number of additional homes underwater, so most owners have a solid cushion.
Purchasing power, on the other hand, hinges almost entirely on mortgage rates. Here’s what I’m watching over the next few months:
- The Fed’s next meetings. Another hike could keep rates elevated; a pause could calm markets.
- Inflation and oil prices. Energy costs have been a big driver of inflation this year.
- The 10-year Treasury yield. Mortgage rates tend to track it closely.
- Local inventory. If more Turlock owners decide to move despite their low rates, buyers get more choices.
Even a half-point drop in rates would restore meaningful purchasing power. On a $400,000 loan, going from 7.03% to 6.50% would save roughly $140 a month. That’s why staying informed — and staying ready — matters.
Frequently Asked Questions About Record Home Equity and Purchasing Power
Why is home equity at a record high in 2026?
Years of rising home prices, combined with homeowners steadily paying down low-rate mortgages, have pushed record home equity to about $17.9 trillion for owners with a mortgage, according to Cotality’s Q2 2026 data.
Why do buyers have less purchasing power if homes aren’t much more expensive?
Because mortgage rates jumped. With the 30-year fixed at 7.03% as of late September 2026, the same monthly payment supports a smaller loan than it did a year ago, when rates averaged about 6.30%.
Can I use my home equity without selling?
Yes. A HELOC or home equity loan lets you borrow against your equity while keeping your existing first mortgage. Just be careful with variable rates and only borrow what you can comfortably repay.
Is now a good time to sell my Turlock home?
If you have strong equity and a clear plan for your next home, it can be. The key is pricing correctly for today’s buyers. A local market analysis is the best place to start.
Let’s Talk About Your Equity and Your Next Move
Record home equity and shrinking purchasing power are two sides of the same market. Whether you’re a homeowner wondering what your equity can do for you, a move-up buyer trying to make the numbers work, or a first-time buyer looking for your way in, the right strategy depends on your personal situation — not the national headlines.
I’ve helped Turlock, Modesto, Ceres, and Central Valley families navigate every kind of market for more than 20 years. If you’d like a clear, honest look at your options, reach out to me here or call or text me at 209-620-4142. Let’s put your record home equity to work — the smart way.