More homeowners are “equity rich,” but what can they do with that wealth?

​In the world of real estate, there’s a term called “equity rich.” That’s when a home’s mortgage balance is 50% or less than its market value. And it’s one of the effects of escalating housing prices. Among U.S. homes with mortgages, the portion of properties that term applies to is over 49%, a more than 3% increase from last quarter.

That’s according to a report out Thursday from the real estate data company Attom. But while more homeowners may be equity rich, what they can do with that wealth right now is limited.

Kate Sam and her husband got a great deal on their small house in Baltimore when they bought in 2010, and an even better deal on their mortgage rate a couple years ago. With about 50% equity in the house, they said they feel secure.

“It feels like we did something right,” Sam said. “We will have something to pass on to our kids, but it feels limiting. Like, why would we give this up?”

Sam would actually love to give it up — for a bigger place.

Her husband, who’s an artist, works on the tiny sun porch. And because she doesn’t have a desk, she often does her nonprofit communications work from an armchair in the living room.

But with current home prices and mortgage rates, “it’s hard to justify making the leap to a bigger house right now, possibly ever, honestly,” Sam said.

Homeowners who don’t want to move can also tap into equity to fund things, like kitchen renovations or college tuition. But refinancing or taking out a home equity loan comes with today’s high interest rates.

Jenny Schuetz, a senior fellow at Brookings Metro, said having money in your house is not like having it in a piggy bank or in mutual funds.

“You can sell some of your mutual funds,” Scheutz said. “You can’t sell off a part of your house. The only way to tap some of the equity while staying in the house is to use these financing tools.” 

Those financing tools include a cash-out refinance, an option, say that parents have traditionally used to help their grown kids become homeowners, too, said Susan Wachter, a real estate and finance professor at the University of Pennsylvania’s Wharton School.

“They can’t do that today,” Wachter said, noting interest rates simply being too high. “They can’t refinance, take the cash out, give it to their kids for paying for downpayment.”

But even if it is hard for people to access the money that’s tied up in their homes, just having increased equity makes homeowners feel richer — and that affects their spending, Scheutz said.

“They’re more likely to do things like go on a vacation or spend more money going out to dinner more often,” Scheutz said.

Even if they’re not planning on selling their home and getting a big payout for years, they’re more likely to feel wealthy — and to act like it.