U.S. home equity below 50 per cent for first time since 1945

1945 is when data first was collected! Even more startling is that over ten percent of homeowners have zero or negative equity and that this figure is rapidly increasing. With a recession looming this can only make matters worse.


Homeowner Equity Below 50% for First Time Since 1945

The Associated Press
March 6, 2008

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.

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.

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
percent 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 percent,
will
be "upside down" if prices fall 20 percent from their peak.

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

The news follows a report from the Mortgage Bankers Association on
Thursday
that home foreclosures skyrocketed to an all-time high in the final
quarter
of last year. The proportion of all mortgages nationwide that fell into
foreclosure surged to a record of 0.83 percent, while the percentage of
adjustable-rate mortgages to borrowers with risky credit that entered
the
foreclosure process soared to a record of 5.29 percent.

Experts expect foreclosures to rise as more homeowners struggle with
adjusting rates on their mortgages, making their monthly payments
unaffordable. Problems in the credit markets and eroding home values
are
making it harder to refinance out of unmanageable loans.

http://www.cnbc.com/id/23503784