The Federal Reserve Board reported today that American’s percentage of equity in their homes slipped below 50% last year:
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.
None of this should be a surprise. Home prices have fallen and equity would inevitably fall with it. The problem will lie with those people who were using the equity in their homes as a piggy bank.
March 6th, 2008 at 5:41 pm
Better a piggy bank then an ATM. Most people buy homes with the intent to live in them and someday sell and upgrade or downsize. So I see the piggy bank as meaning savings and the ATM analagy as fast money.
March 6th, 2008 at 6:22 pm
Yes except the piggy bank has been emptied out.
March 7th, 2008 at 9:29 am
That’s a shame to see people not building any equity in their homes.
April 17th, 2008 at 2:40 pm
I keep telling clients to buy because they need a home not an asset and by treating it as such they forget about their basic needs. Yes, we hope the purchases will go up in value over the years but the crazy run up over the seller’s market years was just so insane it had to end.
I hope to see tighter lending laws, downpayments that hurt the wallet and slower building equity coming back into fashion. Healthier for our markets all around…