Gains in household real estate equity have far outpaced growth in U.S. mortgage debt, according to new numbers from the Federal Reserve board.

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Household real estate wealth continued to balloon in the first quarter of 2022, even as mortgage rates ramped up on their steep ascent and put a damper on home demand.

Early numbers from the Federal Reserve board of governors show that household equity in real estate in the U.S. grew to $27.8 trillion in the first three months of the year, a whopping $1.4 trillion increase from the previous quarter.

Over the same period, total U.S. mortgage debt grew to $12.8 trillion, a more “modest” $240 billion rise.

The extent to which home-equity gains outpaced new mortgage debt in the early months of 2022 highlights just how long it took for weakening demand to slow price growth.

Americans took out mortgages at a breakneck pace throughout most of the pandemic, capitalizing on record-low interest rates. This helped fuel a nearly unprecedented boom in demand for homes, driving up prices and fueling cutthroat competition among buyers — and record-high sale prices for sellers.

These numbers may also reflect how much the boom in demand has been driven by homeowners moving during the pandemic vs. new buyers entering the market.

Existing homeowners can roll over equity from a recent sale into the purchase price of their next home, often offsetting the need to take out much additional debt. Homeowners are also regularly paying down part of the balance of their loans with each mortgage payment, which reduces the amount of total mortgage debt the Fed would have otherwise recorded.

Much has changed since the first couple of years of the pandemic and even the first quarter of 2022, from which these newly released numbers were taken.

For one thing, the fall in demand has proven deep and protracted. And this has finally been showing up in home price growth, which — while still increasing throughout much of the country — has ground to a much slower pace in recent months.

The next version of this report, “Financial Accounts of the United States,” is still months away from release. When available, it will provide a window into April, May and June, when the air really started to come out of the home market and affect purchase prices.

Email Daniel Houston

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