Home Equity Slips Below 50%

According to a report released recently by the Federal Reserve in its quarterly U.S. Flow of Funds Accounts, Americans’ percentage of equity in their homes has fallen below 50 percent for the first time on record since 1945.

According to the report, homeowners’ percentage of equity slipped to a revised lower 49.6% in the second quarter of 2007, 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.

Do you own a home now?  If so, where do you think you fit in to this report?  We’d love to hear any comments you might have regarding home equity.  Just leave us your thoughts by clicking the "comment" link below.  Your identity (email address) will never be published here.