Home equity slips below 50%

[Saguaro]

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

Homeowners' percentage of equity slipped to a revised lower 49.6% 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% in the fourth quarter - the third straight quarter it was under 50%. 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.

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% or more home financing.

Economists expect this figure to drop even further as declining home prices eat into the value of most Americans' single largest asset.

Moody's Economy.com estimates that 8.8 million homeowners, or about 10.3% of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9%, will be "upside down" if prices fall 20% from their peak.

The latest Standard & Poor's/Case-Shiller index showed U.S. home prices plunging 8.9% in the final quarter of 2007 compared with a year ago, the steepest decline in the 20-year history of the index.

http://money.cnn.com/2008/03/06/real_estate/home_equity.ap/index.htm?cnn=yes

[jim]

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

Homeowners' percentage of equity slipped to a revised lower 49.6% 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% in the fourth quarter - the third straight quarter it was under 50%. 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.

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% or more home financing.

Economists expect this figure to drop even further as declining home prices eat into the value of most Americans' single largest asset.

Moody's Economy.com estimates that 8.8 million homeowners, or about 10.3% of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9%, will be "upside down" if prices fall 20% from their peak.

The latest Standard & Poor's/Case-Shiller index showed U.S. home prices plunging 8.9% in the final quarter of 2007 compared with a year ago, the steepest decline in the 20-year history of the index.

http://money.cnn.com/2008/03/06/real_estate/home_equity.ap/index.htm?cnn=yes

Yep: "W" et al thought that creating inflation was "growing" the economy:mw:akbar

[April15]

It is the Milton Freidman school of free market capitalism that has brought most of this. Business' needs to be ethically checked to keep the kind of lending that was going on from beginning in the first place.
I would say a good portion of home buyers have no clue about compound interest or even the effects of simple interest on debt. Not to mention the contract of purchase.

[jim]

It is the Milton Freidman school of free market capitalism that has brought most of this. Business' needs to be ethically checked to keep the kind of lending that was going on from beginning in the first place.
I would say a good portion of home buyers have no clue about compound interest or even the effects of simple interest on debt. Not to mention the contract of purchase.


No: They do not:zen:brr

[Capitalist]

Yep: "W" et al thought that creating inflation was "growing" the economy:mw:akbar

People were stupid enough to keep borrowing against their equity. I fail to find fault anywhere but with those who did it.

I BTW have never gotten a mortgage to borrow equity of a home I owned.

[Capitalist]

It is the Milton Freidman school of free market capitalism that has brought most of this. Business' needs to be ethically checked to keep the kind of lending that was going on from beginning in the first place.
I would say a good portion of home buyers have no clue about compound interest or even the effects of simple interest on debt. Not to mention the contract of purchase.

Then it sounds like they were too stupid to be borrowing the money in the first place.

Seems to me the mirror shows who was at fault.
You leftists have no use for personal responsibility when there are votes to get by telling someone, 'it's ok it was not your fault'.

[Trueblue]

No, we liberals believe in personal responsibility. We especially wish that Bush, Cheney, Lay, Rush, etc, would show some.

[Saguaro]

So it's ok by you for banks to reel in unsuspecting borrowers ? Capitalist

Just how many people read every line of a mortgage ? It is ultimately their fault, yep, sure is, BUT the banks take just as much credit for these probelms

[April15]

Then it sounds like they were too stupid to be borrowing the money in the first place.

Seems to me the mirror shows who was at fault.
You leftists have no use for personal responsibility when there are votes to get by telling someone, 'it's ok it was not your fault'.You missed my point, that since people are not financial wizards the banking industry must have ethics and be
checked to ensure the honesty of the loans to be made. In short that the borrower has the means to make the payments from start to finish.

[Capitalist]

No, we liberals believe in personal responsibility. We especially wish that Bush, Cheney, Lay, Rush, etc, would show some.

Yawn.. what the fuck does that have to do with this?

[Capitalist]

So it's ok by you for banks to reel in unsuspecting borrowers ? Capitalist

Just how many people read every line of a mortgage ? It is ultimately their fault, yep, sure is, BUT the banks take just as much credit for these probelms

To answer your question. Yes, if you do not understand what will happen with the rate of a mortgage you get that is not the fault of the lender. It is not the fault of the lender if you borrow more than you can afford to pay back.

No one has a gun held to their head to take a loan.

When I got a mortgage I read it all and highlighted what I did not understand. I then had them explain , in normal english, all of those things.

And even though I read and understood or had explained to me everything, if I had borrowed too much it would be MY FAULT.

What is it with you people to assign virtuall no blame to the people responsible for their own lives like they are ignorant children.

Is that part of the subtle racism of low expectations only expanded to include everyone who makes poor choices?

[Capitalist]

You missed my point, that since people are not financial wizards the banking industry must have ethics and be
checked to ensure the honesty of the loans to be made. In short that the borrower has the means to make the payments from start to finish.

Wa Wa..

People make poor choices they pay the consequences. Unless democrats can buy their votes by blaming someone else and bailing them out.

[Trueblue]

You missed my point, that since people are not financial wizards the banking industry must have ethics and be
checked to ensure the honesty of the loans to be made. In short that the borrower has the means to make the payments from start to finish.

Excellent post. This is it exactly. This is why we need federal regulations, because if the lending industry isn't kept honest, people will figure out ways to avoid using their services.

Honestly, some people just think that all the power belongs to the rich and that everybody else is just dirt.

The reason I mentioned Bush, Cheney, etc is because there is never any accountability expected from the Pubs, just from everybody else. :lol

[Cookie Parker]

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.

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% or more home financing.

Economists expect this figure to drop even further as declining home prices eat into the value of most Americans' single largest asset.

This is the de-regulated business living off corporate welfare. There is no loss to the unethical practices of these sharks. American people have had histories of trusting banks and realtors and lenders to provide them with money they feel they can afford. You'd be surprised the number of con sales pitches..and what about the "tax free property taxes" sold in the bill of goods.

April 15 and jim are correct. This is a case of the business being able to con the public. Without regulations, this is what greed and corruption has done to this nation.

Responsibility for it rests with those in positions of government authority who knew what was going on but took the PAC monies to look the other way.

[April15]

To answer your question. Yes, if you do not understand what will happen with the rate of a mortgage you get that is not the fault of the lender. It is not the fault of the lender if you borrow more than you can afford to pay back.

No one has a gun held to their head to take a loan.

When I got a mortgage I read it all and highlighted what I did not understand. I then had them explain , in normal english, all of those things.

And even though I read and understood or had explained to me everything, if I had borrowed too much it would be MY FAULT.

What is it with you people to assign virtuall no blame to the people responsible for their own lives like they are ignorant children.

Is that part of the subtle racism of low expectations only expanded to include everyone who makes poor choices?

So if the lender knows you do not make enough money to pay after the first interest change it is YOUR fault for getting the loan? I hate to say this but many Americans are not good at finances. The lender has a certain responsibility to ensure there is ability to pay through the life of the loan.
They are well aware that a zero down with fixed for 1 year at interest only that has a change to full principle and interest payment in 1 year and the borrower is a busboy will default.
That is preditory! They know better but want the mortgage broker fees along with appraisers.