Homeowner Equity Is Lowest Since 1945

[Judi Lynn]

Source: Associated Press

Mar 6, 12:50 PM EST

Homeowner Equity Is Lowest Since 1945

By J.W. ELPHINSTONE
AP Business Writer

NEW YORK (AP) -- Americans' percentage of equity in their homes fell below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday.

Homeowners' portion of equity slipped to downwardly revised 49.6 percent in the second quarter of 2007, the central bank reported in its quarterly U.S. Flow of Funds Accounts, and declined further to 47.9 percent in the fourth quarter - the third straight quarter it was under 50 percent.

That marks the first time homeowners' debt on their houses exceeds their equity since the Fed started tracking the data in 1945.

The total value of equity also fell for the third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.




Read more: http://hosted.ap.org/dynamic/stories/H/HOME_EQUITY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2008-03-06-12-50-39

[Melissa G]

1. Our corporate masters like it better when we are in debt to them.

So much easier when they own everthing to remind us we are constantly beholden to them.

[bdamomma]

5. this has to end, they must be held accountable.

do you ever wonder this was part of plan too, to throw people in the streets.

[CANDO]

10. Beware people who don't care any longer!

The ruling class elite have it coming. They don't realize the shit storm they are in for when people lose all hope.

[Warpy]

2. Net worth

is going to be increasingly important as easy credit starts to dry up. In other words, if you don't have equity in something, somewhere, you're not going to be able to borrow any money for toys. Or healthcare.

[Mountainman]

3. The value of your home is falling because of all the homes for sale and people have borrowed

the equity to pay for other things.

I borrowed on my equity to build horse facilities and then put the property up for sale and have reduced the price $100K in the last year.

So equity was built up during the build up of the housing bubble now things are going the other way. C'est la vie

[selador]

12. also a boon

a boon for buyers

in my area, home prices went up over 100% in the same period where incomes went up about 20%

that is unsustainable.

it's good the bubble is popping. people who were disciplined will be able to buy houses they couldn't afford.

this is standard in all markets. real estate is no different.

[slackmaster]

4. Fundamental weakness in how that figure was calculated

From the article:

Home equity, which is equal to the percentage of a home's market value minus mortgage-related debt, has steadily decreased even as home prices jumped earlier this decade due to a surge in cash-out refinances, home equity loans and lines of credit and an increase in 100 percent or more home financing.

I wish to explain something here based on my knowledge of what information is available.

The Fed does not have access to current balances of lines of credit. Nobody has access to an accurate figure for that. The only figure it can use for LOC debt is the credit limits of lines, which is available from public records, though not as precisely as one might assume.

For example, here is my present equity situation:

Home value = $500,000 (rough conservative estimate)
1st Trust Deed Balance = $100,000
HELOC Credit Limit = $210,000
Actual amount owed on HELOC = $10,000

So, my true equity position:

$500,000 - $100,000 - $10,000 = $390,000

My equity the way the Fed and others calculate it:

$500,000 - $100,000 - $210,000 = $190,000

On paper, it looks like my equity is less than 50% of my home's market value. That is not the case by a long shot.

The true figure is unknown and can only be estimated. I have no doubt that the trend is toward putting people under water, but it may not actually be as dire as depicted in the article.

The fact that my HELOC line is more than my first TD creates interesting consequences for marketing people. They assume that the larger figure, $210,000, is my actual amount of debt. All the loan solicitations I get in the mail are wrong.

[yardwork]

8. That makes sense.

If the feds determined my net worth by counting the credit limit on my cards instead of my actual credit card debt (which I pay off each month), they would erroneously add a lot of "debt" to my record.

The trouble is that many people actually have borrowed to the limits of their lines of credit, credit cards, etc. Everytime I turn around my credit card company raises the limit on my card. I don't want this kind of debt so I don't use it. Many people have used it, though. Many of them have been forced to go deeply into debt to pay medical bills.

A lot of this goes back to the healthcare crisis in this country. Republicans would like us to believe that everyone in debt is just buying "toys," but the truth is that many people have run into financial disaster because of medical bills.

And the Republicans talk about "family values." What tears a family apart faster than unmanageable debt and healthcare crises?

[Turbineguy]

6. This economy seems to be headed for

"Misson Accomplished!"

[DBoon]

7. Home equity is a social safety net

We have no government provided safety net, so people borrow to pay medical bills, college education, tide over periods of unemployment, etc.

[JTFrog]

9. Mission Accomplished - smirk, smirk. n/t

[parkeradison]

11. regarding homeowner equity

Yet another revelation of our current economic crisis. That's why so many of us are counting the days till Bush is gone.

[CountAllVotes]

13. Welcome to the DU parkeradison!!

:hi: and welcome to the DU!! :D

:dem: :kick:

[Omaha Steve]

14. Home debt greater than equity for first time since '45

Source: Associated Press

Home equity for the average American has dropped below 50% for the first time since World War II, reflecting a widespread decline in home values and relatively loose mortgage practices during much of this decade.

The average homeowners' equity — the market value minus mortgage balance — fell to 47.9% at the end of 2007, the Federal Reserve reported Thursday. The Fed also issued revisions to earlier reports indicating that, for the first time in record keeping dating back to 1945, home equity was below 50% for the last nine months of 2007.

The drop below 50% is partly symbolic: Average home equity was declining even as the last housing boom approached its peak in 2005. But the newly issued number underscores the problems for millions of Americans struggling to hang onto their homes as their mortgage rates adjust upward and their property values decline. It also has broader implications for consumer spending in the USA's sputtering economy, up a paltry rate of 0.6% in the last quarter.


By Don Ryan, AP
As home prices fall, more sellers are putting out "price reduced" signs like this one in a subdivision in Happy Valley, Ore.

As the "wealth effect" powered consumer spending across the economy during the housing boom, declining home equity fosters consumer caution.


Read more: http://www.usatoday.com/money/economy/housing/2008-03-06-foreclosure-record_N.htm?csp=34

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STATE BY STATE: Fourth quarter delinquencies, foreclosures: http://www.usatoday.com/money/economy/housing/2008-03-06-foreclosure-chart-q407_N.htm?loc=interstitialskip

[khaos]

15. the transfer of wealth is being executed with military precision..

guess who's fault it is?

[NickB79]

16. Thank God I didn't listen to my best friend 2 years ago

He was telling me I had to buy a house to start building equity. No money down? No problem!

I'm almost afraid to ask him how is finances are doing now; I'm afraid he'll think I'm rubbing it in that he's taking a hosing on the new house they had built at the peak of the market.

[8 track mind]

17. Man....

I'm glad a bought a fixer-upper