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Home Equity Falls Below 50 Percent
Yahoo! Finance ^ | March 6, 2008

Posted on 03/06/2008 9:36:15 AM PST by Toddsterpatriot

Federal Reserve Report Shows Homeowner Equity Dipping Below 50 Percent, Lowest on Record

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 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.


TOPICS: Business/Economy
KEYWORDS: doomage; equity; homeowner; homeowners; realestate; wealth; wearedoomed
I'm surprised Americans have any equity in their homes.
1 posted on 03/06/2008 9:36:15 AM PST by Toddsterpatriot
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To: Toddsterpatriot

Just Wow!


2 posted on 03/06/2008 9:36:36 AM PST by Red in Blue PA (Truth : Liberals :: Kryptonite : Superman)
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To: 1rudeboy; Mase; expat_panama; Rusty0604; Jim 0216; xjcsa; VegasCowboy; ex-Texan; Fan of Fiat; ...

Ping!


3 posted on 03/06/2008 9:37:21 AM PST by Toddsterpatriot (Why are protectionists so bad at math?)
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To: Toddsterpatriot
The problem is not the 50%’s. The problem is the -30%’s
4 posted on 03/06/2008 9:38:07 AM PST by paul51 (11 September 2001 - Never forget)
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To: Toddsterpatriot

and yet, Dems still pledge to raise taxes on America for their healthcare initiative


5 posted on 03/06/2008 9:39:38 AM PST by sappy
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To: Toddsterpatriot

I believe that this value will continue to fall for some time. I further believe that when this value turns positive it will be a powerful signal to indicate the bottom of the market has or is just about to occur. In other words, don’t buy if you can avoid it until this indicator goes positive.


6 posted on 03/06/2008 9:40:09 AM PST by taxcontrol
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To: Toddsterpatriot

Does this count negative equity? Or is 0% as low as you can go for this calc?


7 posted on 03/06/2008 9:41:35 AM PST by VegasCowboy ("...he wore his gun outside his pants, for all the honest world to feel.")
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To: sappy

and yet, Dems still pledge to raise taxes on America for their healthcare initiative...
:::::
Washington, and specifically the Dims, remains TOTALLY OUT OF CONTROL. They are methodically and insanely destroying America with excessive taxation and regulation, malfeasance, disregard for the Constitution and our system of laws. We see its disasterous impact daily now.


8 posted on 03/06/2008 9:42:31 AM PST by EagleUSA
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Comment #9 Removed by Moderator

To: Toddsterpatriot
first time on record since 1945

That's when houses were $5000. Some people pay that much on their mortgage every month now.

10 posted on 03/06/2008 9:45:44 AM PST by RightWhale (Clam down! avoid ataque de nervosa)
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To: VegasCowboy
Does this count negative equity? Or is 0% as low as you can go for this calc?

Good question. I think they take the value of all homes and compare to the amount of all mortgages. I think they do count individuals with negative equity in this calculation.

11 posted on 03/06/2008 9:47:18 AM PST by Toddsterpatriot (Why are protectionists so bad at math?)
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To: Para-Ord.45

“..... big socialist government will save you and stick all the other home owners who are paying their bills on time with the tab.”

This is exactly what is going to happen.

It is already happening with increasingly insane cost of “higher education”: funding for those who CHOOSE not to sacrifice for their children’s education paid for by those that are.


12 posted on 03/06/2008 9:49:00 AM PST by EyeGuy
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To: VegasCowboy
This is a strangely written story.

If what you owe is more than what the house is worth, then you have -zero- equity. I guess this story is saying more people are upside down than have equity. (?)

When you are upside down on your loan (owe more than the value) I guess you could say it is negative equity?.

13 posted on 03/06/2008 9:49:06 AM PST by Lurking in Kansas (Never argue with an idiot. They drag you down to their level, then beat you with experience.)
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To: sappy; All

I doubt that the people for whom the Dems pledge to raise taxes are the ones suffering forclosure on their primary residences, or if they are they should have been smart enough or educated enough not to make foolish investments at 100% financing. Of course there are probably people with higher incomes who made investments or bought a McMansion that they may no longer be able to afford, but at least if they have enough income to be the target of higher taxes, they also have enough income to afford health insurance.


14 posted on 03/06/2008 9:50:30 AM PST by gleeaikin
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To: Toddsterpatriot

15 posted on 03/06/2008 9:50:34 AM PST by oh8eleven (RVN '67-'68)
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To: Toddsterpatriot

Wasn’t Bush the one, who stepped into office promising to establish a culture of american private ownership ?

Now it’s safe to say that failure is getting an all new standard set at the moment.


16 posted on 03/06/2008 9:55:59 AM PST by Rummenigge (there are people willing to blow out the light because it casts a shadow)
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To: Toddsterpatriot

You had to be deaf, dumb and blind not to see this coming. I decided to stay put and pay off my home five years ago instead of buying a bigger house like many of my friends and I’m glad I did.


17 posted on 03/06/2008 9:56:10 AM PST by kempo (H)
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To: EyeGuy

It is already happening with increasingly insane cost of “higher education”: funding for those who CHOOSE not to sacrifice for their children’s education paid for by those that are.


You think education costs are bad now...wait until libs (McCain included) get this DREAM Act passed.....and we subsidize illegal alien college education. Talk to me about education costs then.....


18 posted on 03/06/2008 10:10:04 AM PST by UCFRoadWarrior (McCain/Hillary/Obama: All Liberals To Me)
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To: Toddsterpatriot

Of course the amount of equity has dropped! That’s what several years of a building boom will do for you. When the masses are buying new houses, they aren’t going to have a lot of equity.

This just echoes the fact that millions of Americans are well-off enough to have bought new houses recently.

That’s a good thing.


19 posted on 03/06/2008 10:22:31 AM PST by Tex Pete (Obama for Change: from our pockets, our piggy banks, and our couch cushions)
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To: Toddsterpatriot

This must be vs mortgage value, not new value.


20 posted on 03/06/2008 10:26:17 AM PST by spanalot
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To: taxcontrol
In other words, don’t buy if you can avoid it until this indicator goes positive.

Don't sell now either if you can avoid it. Wait until things pick up.

Might not be a bad time to build, though, because the price of building materials is down and builders are hungry for work.

21 posted on 03/06/2008 10:31:15 AM PST by randita (We're having to cut back to afford gas. When's the government going to cut back!)
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To: kempo

Ditto’s here. Got less than 30K left on the mortgage and NEEDED a HELOC to offset my taxes. Using the HELOC to fix up the old casa a bit at a time. Inside of 10 years I will have no mortgage and no HELOC either, interest is money you never get back.


22 posted on 03/06/2008 10:32:49 AM PST by Camel Joe (liberal=socialist=royalist/imperialist pawn=enemy of Freedom)
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To: spanalot
This must be vs mortgage value, not new value.

Take the balance of your mortgage now. Divide by the value of your house now. Repeat for the entire country.

23 posted on 03/06/2008 10:34:45 AM PST by Toddsterpatriot (Why are protectionists so bad at math?)
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To: Toddsterpatriot

Just thrilled with the glowing news of the day. /sarc

What will happen when our troops return? The Greatest Depression or a Boom? Our military friends are having difficulty finding good jobs.


24 posted on 03/06/2008 10:35:45 AM PST by madison10
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To: Toddsterpatriot
We're dooooooooooooooooooooooomed!
25 posted on 03/06/2008 10:36:57 AM PST by Tolerance Sucks Rocks (Cloverfield 2008! Why vote for a lesser monster?)
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To: Rummenigge

What’s the homeowner equity situation like in Germany?


26 posted on 03/06/2008 10:39:48 AM PST by Tolerance Sucks Rocks (Cloverfield 2008! Why vote for a lesser monster?)
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To: Toddsterpatriot
Using one's home as an ATM machine and the depreciating real estate values accounts for the decline in home equity.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

27 posted on 03/06/2008 10:41:24 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: Camel Joe
Got less than 30K left on the mortgage and NEEDED a HELOC to offset my taxes.

Don't know much about this stuff...why did you need a HELOC to offset your taxes? Do you mean as a deduction on the interest?

28 posted on 03/06/2008 10:42:01 AM PST by madison10
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To: Lurking in Kansas

No. What they are saying is people OWE more than what they OWN. Which was a very weird way of saying it, not meaningful at all.

The total debt for homes is now more than 50% of the total value of the homes. For an individual, a debt of 50% of the home value is fine — most people would be happy at that value.

But a LOT of people own their homes outright, or owe very little, so in order for the total to be at 50%, a lot of other people pretty much have NO equity, or worse owe more than their house is worth.

But the number itself doesn’t tell you how many are actually negative. With the refinance boom, a lot of people who previously owed a low percentage of their total value because their house went up in value while they paid off their mortgage, were now taking out new loans, often to 80% or 90% debt ratios.

So as they point out, even before the market turned south, the total debt-to-equity ratio was dropping. Again, a lot of financial advisors thought this was a good thing, because your money tied up in real estate was better used investing elsewhere.

Of course, now that home values are dropping, EVERYBODY who has a loan is seeing their “debt-to-equity” ratio increase.


29 posted on 03/06/2008 10:44:31 AM PST by CharlesWayneCT
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To: gleeaikin
You are so inceredibly WRONG. The Dems will claim anybody making more than $30,000 a year is 'rich' and will raise thir base tax rate accordingly. Watch and see, every single level of the tax table will be increased. The middle class will get slammed with the brunt of any tax increase.

The health care debacle in this country is a direct result of the 1960's legislation that created medicare and every misstep to regulate the health care industry. The only result of continued government interferrence will be HIGHER medical costs and DEGRADED medical care for all but the very wealthy and the politically powerful. Welcome to Canadian and European style health care.

30 posted on 03/06/2008 10:45:10 AM PST by 7mmMag@LeftCoast (The DNC and Rino's: they put the CON into congress everyday.)
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To: Toddsterpatriot

How many people know that you can’t claim a capital loss on the sale of a house any more?


31 posted on 03/06/2008 10:57:40 AM PST by DManA
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To: madison10
Our military friends are having difficulty finding good jobs.

As a defense contractor in the DC area, every company I know of is desperate for bodies. And there's no one they'd rather hire than a former A/AF/N/M vet. Of course it's horribly expensive here, but the pay is good.

32 posted on 03/06/2008 10:59:35 AM PST by meowmeow (In Loving Memory of Our Dear Viking Kitty (1987-2006))
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To: DManA
How many people know that you can’t claim a capital loss on the sale of a house any more?

When could you?

33 posted on 03/06/2008 11:00:19 AM PST by Toddsterpatriot (Why are protectionists so bad at math?)
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To: madison10

Yes, income taxes were killing us. I borrow just enough to offset the taxes and still complete a project.


34 posted on 03/06/2008 11:01:45 AM PST by Camel Joe (liberal=socialist=royalist/imperialist pawn=enemy of Freedom)
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To: sappy

But, but, it’s frrrreeeeee!! /s

That’s after they jack gas prices up by reducing oil companies’ tax credits.


35 posted on 03/06/2008 11:21:56 AM PST by Hoffer Rand
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To: Toddsterpatriot; DManA
"...you can’t claim a capital loss on the sale of a house any more..."

Sure you can.

On the freerepublic people can lay claim to anything they want; and with the IRS, gains and losses from property sales are reported on Schedule D.

36 posted on 03/06/2008 11:59:14 AM PST by expat_panama
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To: Tex Pete
Americans are well-off enough to have bought new houses recently.  That’s a good thing.

That's great Mister Smart Guy.  

OK, maybe you know a lot about real-estate, but you sure as hell don't know squat about getting copy syndicated with the AP.

37 posted on 03/06/2008 12:07:08 PM PST by expat_panama
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To: randita
Don't sell now either if you can avoid it.

My ex wife is trying to sell a house her and her second ex husband bought together when they were playing house. I get to hear a litany of woe when I come pick up my son every other week.

I just keep thinking ... Schadenfreude.

38 posted on 03/06/2008 12:12:18 PM PST by Centurion2000 (su - | echo "All your " | chown -740 us ./base | kill -9 | cd / | rm -r | echo "belong to us")
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To: paul51

“The problem is not the 50%’s. The problem is the -30%’s”

statistics can easily present a deadly false impression

and there you are so correct

because the recent - past 2,3 year - home buyers, of whom a large number now have possible sale prices (if they MUST sale so soon) lower than what they owe on their mortgage

they skew the AVERAGE to a much lower rate than the numerical median (1/2 above, 1/2 below) would reflect

the more accurate number would be, numerically (how many), what portion of homeowners have less than 50% equity in their homes - NOT this non-informational AVERAGE for the equity overall


39 posted on 03/06/2008 12:30:00 PM PST by Wuli
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To: remember
"Americans' percentage of equity in their homes has fallen below 50 percent for the first time on record since 1945."

The AP has gotten so wound up with the election rhetoric that they're missing the big news, namely that the Fed's gone and rewritten all their historical data going back to the '50's.  I know of at least two freepers who've got a lot of graphs to revise.

 The other is that the latest Flow of Funds is out and it shows real net work declining to levels we had two years ago.  Notwithstanding the goofy AP hype, this drop in the real estate equity component is barely noticeable with most of the losses being from stocks etc.

What's funny to me is that this drop is nowhere near the collapse we had in 2000 back when the Dem press was complaining about how Republicans were supposedly talking down our "wonderful" economy.

40 posted on 03/06/2008 1:35:00 PM PST by expat_panama
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To: expat_panama

“That’s great Mister Smart Guy.

OK, maybe you know a lot about real-estate, but you sure as hell don’t know squat about getting copy syndicated with the AP.”

I suppose I could skew everything, too. I do happen to work in the real estate industry, and I know exactly what’s been going on the last few years.

I guess I should just say somebody’s gotta pay the piper. The media can’t have it both ways.


41 posted on 03/06/2008 2:13:23 PM PST by Tex Pete (Obama for Change: from our pockets, our piggy banks, and our couch cushions)
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To: Tex Pete
"...somebody’s gotta pay the piper. The media can’t have it both ways."

Exactly right.  The old time news industry is where there's been big time mass lay-off's, and you'll never see any tears from me for those lost jobs.. 

42 posted on 03/06/2008 3:31:43 PM PST by expat_panama
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To: Toddsterpatriot

People like my parents bump the average. We built their home ourselves. They bought the two acres for $5,000 back in 1967 and we built the house in sections as the money came in. It is a nice 2,500 sq. ft. rambler.

They just sold off one of the acres for $525,000.

It’s people like an old friend of mine that drops the average: They bought their home in the mid-1970’s for $17,000. They currently owe more than it’s worth thanks to refinancing-as-ATM - $280,000.


43 posted on 03/06/2008 3:35:33 PM PST by RobRoy (I'm confused. I mean, I THINK I am, but I'm not sure. But I could be wrong about that.)
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To: Toddsterpatriot

This is really stupid.

Watch the government will bail them out too for their STUPID decisions.


44 posted on 03/06/2008 3:36:34 PM PST by nmh (Intelligent people recognize Intelligent Design (God).)
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To: sappy

>>and yet, Dems still pledge to raise taxes on America for their healthcare initiative<<

Talk of a health care initiative only works when there is a chicken in every pot. When things go bad, people worry about other stuff. ‘Course, if you elect someone that says big bad business will pay for it all...


45 posted on 03/06/2008 3:36:50 PM PST by RobRoy (I'm confused. I mean, I THINK I am, but I'm not sure. But I could be wrong about that.)
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To: Tex Pete
This just echoes the fact that millions of Americans are well-off enough to have bought new houses recently.

Um... How well off did you have to be to get a reverse mortgage, Option Arm, 120% NINJA liar loan? Are these well off Americans being foreclosed just because they don't feel like paying their mortgages? Maybe it is all going to vacations, furs and Grey Poupon?

46 posted on 03/06/2008 5:21:42 PM PST by Freedom_Is_Not_Free
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To: Freedom_Is_Not_Free

I am not referring to people who have reverse mortgages. The number of reverse mortgages out there is very small in comparison to all the other outstanding home loans. Very small.


47 posted on 03/06/2008 9:43:00 PM PST by Tex Pete (Obama for Change: from our pockets, our piggy banks, and our couch cushions)
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To: expat_panama
The AP has gotten so wound up with the election rhetoric that they're missing the big news, namely that the Fed's gone and rewritten all their historical data going back to the '50's. I know of at least two freepers who've got a lot of graphs to revise.

Is this just a regular annual revision similar to what is described here? Is so, I'll just continue to revise graphs when they get too out of date and I have the time. Regarding household net worth, I revised that graph just a couple of quarters ago. Anyhow, thanks for the heads up.

48 posted on 03/08/2008 1:16:38 AM PST by remember
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To: Tolerance Sucks Rocks

I don’t know for today but in 2002 it was over 65% (a little more in the east) of peoples equity. That number referres only to homes that are used by the owner.

There’s a strong tendency for building expensive homes in swabia - a quite rich area of germany - there the numbers for home equity that are NOT in self usage are higher then in other areas. In the relatively poor east homes and land is so cheap - it’s the first thing people will buy - especially because they know times when private property was extremely restricted.


49 posted on 03/10/2008 1:14:22 AM PDT by Rummenigge (there are people willing to blow out the light because it casts a shadow)
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