http://www.stltoday.com/stltoday/business/stories.nsf/y...0615F5E?OpenDocument
Federal Reserve: Homeowner equity dips below 50 percent, lowest on record
By J.W. Elphinstone
ASSOCIATED PRESS
Thursday, Mar. 06 2008

NEW YORK -- 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.

Still seems to me that as long as you don't plan on moving anywhere anytime soon, and have a mortgage you can and/or have always been able to afford ...

"EQUITY ain't nuthin' butta imaginary numba!"

It's mainly the D'Whytes that sees homes as investments FIRST that seem to be taking it on the chin. Those who plan on living in their cribs for a while seem to be OK to me, but they're allowing all this media panic to make some of them jump off the boat early and into making some stupid waters.

Once again ... "Daytrading D'Whyte" has f***ed some more s*** up by simply being greedy!

Good thing I'm not looking to move anytime soon. The value on my house has dropped $30,000 in the last four months. Hopefully I won't start seeing a lot of forclosures in my neighborhood.

quote:

Originally posted by FAMUVenom:
Still seems to me that as long as you don't plan on moving anywhere anytime soon, and have a mortgage you can and/or have always been able to afford ...

"EQUITY ain't nuthin' butta imaginary numba!"

It's mainly the D'Whytes that sees homes as investments FIRST that seem to be taking it on the chin. Those who plan on living in their cribs for a while seem to be OK to me, but they're allowing all this media panic to make some of them jump off the boat early and into making some stupid waters.

Once again ... "Daytrading D'Whyte" has f***ed some more s*** up by simply being greedy!

The reality is that most 1st and even 2nd time home buyers purchase what they can afford at that time, and as their lives continue to develop (starting families etc..), their needs change. Trading up is not really possible with that mythical equity number being wiped out, so they likely will have to make due with what they have. It doesn't necessarily say they viewed it as an investment because maybe the 5%-20% they put down is potentially wiped out now, and they had hoped they would at least still have that value in the house.

As a relatively recent condo owner, and am at the plane's descent of finally finishing a total HGTV-style renovation of it by the end of the month, I'm really just now trying to understand the "behind the music" mechanics & numbers crunching of this real estate thang ...

It seems that I'm seeing a wholelotta unnecessary panic setting in among a LOT of people who are unloading cribs that they could just easily just keep paying off and riding out the storm. Folks who were living just fine, and were not even contemplating doing squat, are only jumping ship because the "percieved" equity in their cribs has diminished in some fashion.

I understand how some of the folks with these subprime ARM's are actually being put in some REAL binds, and I do sympathize with them (as I was almost gonna lock into one to get into this before deciding on a 30-year fixed), and I also understand those mad flippers who flat out are just abandoning entire neighborhoods and condo towers without even batting an eye - who I have no sympathy for whatsoever.

But I don't quite understand the persons like I saw on a 60 Minutes or 20/20 segment not too long ago, who is simply refusing to continue paying on a crib they had NO intention of moving from simply because its "market value" has dipped to the point that they are right at or now below what's still owed on it. These folks (D'Whyte's of course) simply stated on camera that because there's currently no equity left in the house they are just gonna quit paying on it, and let the banks now take it ... and even the interviewer was looking like "'WTF?' ... Where are you going to go, and who do you think is going to give you another mortgage after seeing that you've done some dumb s*** like this?" ... And they were like all smug and arrogant and like "Oh well ... We'll just cross that bridge when we get to it".

Granted, I told the Wifey that although we have gone a bit over on the upgrade budget on this project, IF we could sell this for more - or even right at - the same as what we've invested total just to get from under it, and in turn find some person with a crib they need to unload because of being in a legit bad situation - OR some ackjass "flipper gone wild" or overly ambitious developer who got caught up and is looking to fire sale some s*** - I might consider making the move.

I guess I'm just trying to better understand why all this panic from losing this mythical "equity" from some who weren't even plannng on doing s***!

This message has been edited. Last edited by: FAMUVenom,

I don't understand that either. I have yet to run into anybody that is saying something like that. Anybody that I know that is unloading is falling into the category of can't afford, it's not the primary home etc..I really was only pointing out that the equity number is real, especially if you put real savings into buying. It should have little to do with being able to afford your payments post closing, but it definitely isn't mythical.