Nobody gets a letter when they stop being equity-rich. There is no notice in the mail, no line on the mortgage statement, no call from the bank. It is a category a data company sorts you into once a quarter, and between last summer and this one the share of mortgaged Massachusetts homes that qualified fell from 58.2% to 50.4%.
That is 7.8 points in four quarters. Roughly one in seven of the Massachusetts owners who cleared the bar a year ago no longer clears it.
Here is the part that should get your attention. Over the same stretch, Massachusetts homeowners borrowed more against that cushion, not less. The Warren Group puts statewide home-equity loan and line-of-credit volume up 8% year over year through June 30, and up 40% against the first half of 2024.
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I have a version of this conversation every few weeks now. Usually in Newton or Brookline, usually with someone who bought in the late nineties and is deciding between a renovation and a listing. The case they have talked themselves into is that the equity line is the free move. The house never goes on the market, nothing gets disrupted, and the money shows up in a checking account. I want to be straight about why that framing is wrong, and about the narrower set of cases where it is exactly right.
The short version of my stance: equity you have not borrowed against is not just money sitting in a wall. It is optionality. It is what lets you drop your price to hit a deadline, carry two mortgages for six weeks, buy before you sell, or take the clean offer over the higher one. The day you draw on it, you convert that optionality into an obligation that has to be serviced whether or not you ever sell. The dollars are still there. The flexibility is what you spent.
What actually happened to the number
ATTOM defines a home as equity-rich when the loan balances against it are no more than half the estimated market value. Massachusetts went from 58.2% of mortgaged homes in the second quarter of 2025, to 53.2% in the first quarter of 2026, to 50.4% in the second. Nationally the figure is 41.1%, down from 47.4% a year ago and the lowest reading in close to five years.
Massachusetts is still tenth in the country. Within the state, ATTOM has Nantucket, Dukes and Barnstable counties at the top, which is what you would expect from a Cape and Islands ownership base full of long-held second homes carrying little or no debt.
Notice how tight that top ten is. Strip out Vermont, which is an outlier for reasons that have more to do with long-held, low-debt ownership than with anything happening this year, and the states ranked third through eleventh sit inside five points of each other. Massachusetts is 0.4 points above a round number that is going to get written about the moment it breaks.
This is not a price crash, and reading it that way will cost you
The first thing people assume when they see an equity number falling is that values dropped. In Massachusetts that is not what happened, and getting the mechanism right changes what you should do about it.
Prices here have been flat to modestly higher. Lamacchia Realty’s July 2026 report has the statewide average single-family sale price up 3.1% year over year. Our own read of MLS PIN says something similar and more useful: across 24,375 closed single-family sales statewide this year, the average closing came in at 100.2% of the seller’s original asking price, with 57.6% closing at or above it. Sellers are getting their number. That is not a market in retreat.
So why is the share falling? Because equity-rich is a threshold, not a balance. It is a hard line at 50% loan-to-value, and it behaves like any threshold statistic. Between 2020 and 2022, prices rose fast enough to push a large group of owners across that line all at once. When price growth flattened, that migration stopped. Meanwhile the pool keeps taking in everyone who bought between 2022 and 2026 at 80% or 90% loan-to-value, and those owners will need a decade of amortization to come near the line. The share can fall several points a year with values doing nothing at all.
Two things follow. Your dollars did not vanish, so do not panic. But the escalator that used to carry you across the line without any effort has stopped running, and borrowing now moves you in the only direction the market is not moving you back from.
Why the borrowing is happening, and why it is not reckless
I want to give the HELOC decision its due, because the people making it are not being careless. They are responding rationally to a genuinely strange rate environment.
Just under half of American mortgages, 49.9% as of the first quarter of 2026, still carry a rate below 4%. That share was above 65% at the 2022 peak, and it is falling slowly because almost nobody volunteers to give up a 3.2% loan. The FHFA estimates the lock-in effect alone prevented about 1.72 million home sales between 2022 and 2024.
If you hold a 3.2% first mortgage and you need $200,000, a cash-out refinance means repricing your entire balance at today’s 6.66%. A second lien leaves the cheap first loan untouched and prices only the new money. Even at 8.75%, that is usually the better arithmetic. It is why HELOC balances nationally have now risen for 17 consecutive quarters to $459 billion, up 11.6% in a year and 45% off the 2021 low.
So the logic holds. Where it goes wrong is in what people compare it to. The honest comparison is not HELOC versus cash-out refinance. It is HELOC versus selling.
What the money costs at 7.25% to 9.5%
Massachusetts HELOCs are running roughly 7.25% to 9.5% right now, with the best-qualified borrowers occasionally seeing a teaser below that for six months. The national average sat at 7.30% in late August. Most of these lines are quoted as prime plus a margin. Tremont Credit Union in Boston, to pick a local example, prices at prime plus 2%, and with prime at 6.75% that is 8.75% today.
Two features of that structure get glossed over at the kitchen table. First, the rate is variable. It is not your 3.2% mortgage and it is not fixed for thirty years. If prime moves, your payment moves. Second, the draw period lets you pay interest only, which feels affordable and quietly guarantees that you will owe the full balance a decade later.
| Rate on the line | Per month | Per year | Over 10 years |
|---|---|---|---|
| 7.25% (best qualified) | $1,208 | $14,500 | $145,000 |
| 8.75% (prime plus 2) | $1,458 | $17,500 | $175,000 |
| 9.50% (higher CLTV) | $1,583 | $19,000 | $190,000 |
People hear a “blended rate” pitch and relax. On a Newton house with $400,000 left at 3.2% and a fresh $200,000 at 8.75%, the blended cost across all $600,000 is about 5.05%, which sounds tolerable. It is also the wrong number. You are not making a decision about the $400,000. That loan exists either way. The only decision in front of you is the marginal $200,000, and that money costs 8.75%, variable, indefinitely.
And the line does not disappear at the closing table
Here is the piece I find most often missing from the mental math. A home equity line is secured debt against the same house. When you eventually sell, it gets paid off out of the proceeds, in full, before you see a dollar.
Run that against the Newton median of $1,925,000 and the picture is plain. Selling costs and the first mortgage take the proceeds to roughly $1.42 million. Add a $200,000 line and you walk with roughly $1.22 million instead. You did not lose $200,000 by borrowing. You spent it, which is fine if you got $200,000 of value. What you also spent, and what nobody quotes you, is the interest. Ten years at 8.75% is $175,000 that buys no square footage, no basis and no leverage.
The tax rules reward exactly one use of the money
This is the part I wish more people knew before they signed, because federal tax law draws a sharp line straight through the middle of this decision and most owners never see it.
Interest on a home equity line is deductible only when the money is used to buy, build or substantially improve the home that secures it. Use it for tuition, a business, medical bills or paying off cards, and the interest is not deductible at all. The One Big Beautiful Bill Act made that restriction permanent in July 2025, so this is no longer a rule waiting to sunset.
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Now stack the second rule on top. When you sell, your taxable gain is the price less your cost basis. Capital improvements raise that basis. Borrowed money never does. A loan is not income and it is not basis.
Put the two together and the code is unusually blunt about which use it favors. Draw $200,000 for a real capital improvement and you get the deduction now and a higher basis later. Draw the same $200,000 to consolidate debt and you get neither, while owing tax on precisely the same gain you would have owed anyway. Same house, same line, same balance, and two completely different outcomes.
What the MLS data says about selling into the cushion right now
The other half of “should I just borrow” is a question about the sale you are choosing not to run. So I pulled every single-family closing recorded in MLS PIN this year and measured each one against the seller’s original asking price, not a reduced one, which is the only version that tells you whether the first number held.
| Town | Closings | Median price | Days on market | % of original ask | Sold at or over |
|---|---|---|---|---|---|
| Brookline | 77 | $2,525,000 | 24 | 97.3% | 39.0% |
| Wellesley | 176 | $2,400,000 | 15 | 99.6% | 50.6% |
| Newton | 326 | $1,925,000 | 20 | 100.0% | 50.3% |
| Needham | 179 | $1,775,000 | 19 | 99.4% | 45.3% |
| Lexington | 197 | $1,755,000 | 22 | 99.2% | 45.7% |
| Belmont | 64 | $1,630,000 | 17 | 101.2% | 60.9% |
| Arlington | 132 | $1,345,000 | 18 | 105.5% | 70.5% |
| Melrose | 131 | $995,000 | 18 | 107.6% | 77.9% |
| Medford | 125 | $905,000 | 19 | 102.1% | 66.4% |
| Quincy | 173 | $750,000 | 19 | 101.5% | 64.7% |
That table surprised me the first time I ran it, and it is the strongest argument in this piece against a simple “cash out now while the cushion is strong” message. The relationship runs backwards from what you would guess. Melrose sellers cleared 107.6% of their original ask and 77.9% of them closed at or above it. Brookline single-family sellers landed at 97.3%, and fewer than four in ten held their number. The equity is concentrated at the top of that table. The pricing power is concentrated at the bottom.
Inventory explains part of it. Measured against this year’s closing pace, Melrose is carrying about 1.2 months of single-family supply and Arlington about 1.9. Newton sits near 2.5 months and Brookline near 4.6. All of those are tight by any historical standard, which is the real answer to why Greater Boston stays supply-starved even as statewide active listings tick up. But a $2.5 million house draws from a thin, patient, well-advised buyer pool, and that pool negotiates.
So if you own in Newton or Brookline and you have convinced yourself that listing is a layup, the data says price it honestly and plan for a real negotiation. And if you own in Melrose, Medford or the towns just outside the high-equity belt, your sale is executing better than the owners with twice your equity.
Does the renovation actually pay you back?
Most of the HELOC money I see in Newton and Brookline goes into kitchens, primary suites and accessory dwelling units. That last one has a genuinely strong case and I have written the full guide to Massachusetts ADUs separately. For the rest, the fair question is whether the market pays you back.
The premium is real. Listings describing a gut renovation, a full renovation or a new kitchen closed at a median $593 per square foot against $531 for everything else, about 11.7% more. What did not move at all is everything else. One day of difference in market time. Two tenths of a point of difference in the share closing at or above the original ask.
Read that carefully, because it is the whole argument. The renovation is priced into the number. It buys you nothing at the negotiating table, and it is a gross figure that still has to absorb the cost of the work and the interest on the money.
The national Cost vs. Value data lines up with what I see. A minor kitchen refresh at a national median of $28,458 returns about 113% of its cost. A major mid-range remodel at $81,240 returns about 58.6%. Upscale work returns closer to 36%. The pattern is consistent and unforgiving: the smaller and more targeted the project, the better it pays. Then add interest. A $150,000 renovation carried five years at 8.75% costs another $65,600 before you list.
When a HELOC is the right call
I am not against these lines. I have recommended them. Three situations where the math genuinely works:
- A true short-term bridge. You found the next house and you need the down payment for ninety days until yours closes. Interest for one quarter on $200,000 at 8.75% is about $4,375, which is a rounding error against being forced into a contingent offer that a seller will discount or refuse outright.
- A targeted, value-adding improvement with a payback you can name. The kitchen that is stopping the house from trading at its neighborhood number. An ADU with an actual rent estimate behind it. Deferred maintenance that a buyer’s inspector will find and price at three times what it costs you to fix now. In these cases you get the deduction, you get the basis, and you get most of the money back at closing.
- An undrawn line held as a reserve. Open it, pay nothing, keep it for the roof or the furnace. An unused line costs almost nothing and buys real security. Just open it while your income still supports the underwriting, because that is the part people get wrong about timing.
What these share is a defined end. A bridge closes. A renovation gets recouped. A reserve stays at zero. The trouble starts when the line has no end, which is most of the time.
When it is deferring a sale that would net more today
The pattern I am wary of is the owner who does not really want to stay, and who uses the line to make staying feel affordable for another year. That is not a plan. That is a payment on a decision you have not made.
Ask yourself three things. Would you buy this house today at what it is worth? If not, you are already a seller and you are paying 8.75% to postpone it. Does the borrowing have an end date and a repayment source that is not “we will sell eventually”? And what does the line do to the sale you will eventually run, given that every drawn dollar comes off the proceeds and out of your room to negotiate?
One Massachusetts wrinkle belongs in this conversation, and it is one of the few real arguments for slowing down rather than speeding up. The state’s 4% surtax applies to taxable income above $1,107,750 in 2026, and a capital gain counts toward it. A couple who bought in Brookline in 1998 for $600,000, put $100,000 into it, and sells at the current median of $2,525,000 is looking at roughly $1.68 million of gain after selling costs. The federal exclusion takes $500,000 off. What is left still pushes them past the surtax line, and the 4% applies to the slice above it.
That is a timing and structuring problem, not a reason to hold forever. It argues for talking to your accountant before you list, for keeping every improvement receipt going back decades, and in some cases for which tax year you close in. It does not argue for a HELOC, which defers the identical gain while adding interest. If you are anywhere near that threshold, get an accountant on the phone before you talk to me.
What I tell owners on the fence
Start by getting the actual number rather than the Zestimate, because most of these decisions are being made on an estimate that is stale by a year. Our home value tool is a starting point and I will give you a real read if you want one.
Then be honest about the direction of travel. Massachusetts is still tenth in the country for equity-rich share and the Cape and Islands are as strong as they have ever been. But 58.2% to 50.4% in four quarters is not noise, prices are flat rather than climbing, and the mechanism that pushed people across that line has stopped. Whatever the cushion does next, it is not compounding the way it did from 2020 to 2022.
Against that backdrop, my view is simple. Borrow when there is a defined end and a payback you can name out loud. Sell when you are honest that you want to be somewhere else, and stop paying 8.75% to avoid saying it. What I would not do is treat the line of credit as a costless holding pattern, because the one thing it reliably converts is your flexibility, and flexibility is the asset that is actually getting scarcer.
If you are weighing a draw against a listing this fall, I am happy to run both sets of numbers with you before you commit to either. That means a real net sheet on the sale, priced off what is actually closing on your street, next to what the line will cost you over the years you would realistically carry it. No pressure to list. Reach out anytime.
Sources
- ATTOM, Q2 2026 U.S. Home Equity & Underwater Report
- ATTOM, Equity-Rich Properties by State, Q2 2026
- Banker & Tradesman, “Equity-Rich Homes on Decline in Massachusetts as Equity Lending Rises,” Aug. 24, 2026
- Federal Reserve Bank of New York, Household Debt and Credit Report, Q2 2026
- Bankrate, Current HELOC Rates, Aug. 26, 2026
- Freddie Mac, Primary Mortgage Market Survey, Aug. 27, 2026
- FHFA Working Paper 24-03, The Lock-In Effect of Rising Mortgage Rates
- Massachusetts DOR, 4% Surtax on Taxable Income
- IRS Publication 936, Home Mortgage Interest Deduction
- IRS Publication 523, Selling Your Home
- Zonda, 2026 Cost vs. Value Report
- Lamacchia Realty, July 2026 Massachusetts Housing Report
- BMN Boston analysis of MLS PIN closed single-family sales, Jan. 1 to late Aug. 2026 (proprietary).
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