LOS ANGELES — Homeowner equity rose to record highs in the first half of this year, although the rate of growth is slowing as the housing market cools.

In the second quarter, the average homeowner’s equity per borrower reached $298,380, according to data from CoreLogic.

That’s $3.6 trillion in equity held by American homeowners with mortgages, about 63% of all homes, according to the real estate news company.

The average homeowner’s equity jumped 25.3% from the second quarter of last year and rose 6.6% from the first three months of this year. That’s lower annual and quarterly growth than in the first three months of 2022, reflecting a more moderate pace of home price growth as the housing market cooled amid sharply higher mortgage rates.

According to the National Association of Realtors, sales of previously occupied homes in the US fell in August for the seventh month in a row. House prices, which rose by about 20% earlier this year, are rising more slowly. According to NAR, the national median home price rose 7.7% year-over-year in August to $389,500.

House price growth is likely to continue to slow. CoreLogic predicts home prices will rise 5% over the next year.

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“This slowdown in price growth will lead to a slowdown in equity growth,” said Molly Bozell, an economist at CoreLogic.

Increasing homeowner equity creates a buffer for borrowers against potential financial hardships such as job loss. And it can give homeowners the financial flexibility to borrow against their equity to finance big purchases like home improvement projects or pay off high-interest debt — a powerful tool when interest rates rise on revolving debt like credit cards.

The increase in home equity has also helped limit the number of homeowners who find themselves “underwater” on their mortgages or owe more than their home is worth. This is also known as negative equity, which can happen when the value of the home goes down or when the amount of the mortgage increases, say when someone takes out a home equity loan.

In the second quarter, 1.3 million homes, or 2.3% of all homes with mortgages in the U.S., had negative equity, according to CoreLogic. This is 18% less than in the same quarter last year.

The home equity of the average homeowner with a mortgage increased by about $60,190 in the second quarter compared to the same period in April to June last year, according to CoreLogic.

At the state level, Hawaii, California, and Florida recorded the highest average capital gains at $129,800, $117,000, and $100,000, respectively.

Among the states with the lowest average capital gains are Iowa at about $18,000, Alaska and North Dakota at $21,000 each.

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