Equity in Americans’ homes falls to historic low (1945)

Source: MSNBC/AP

The equity Americans have in their most important asset — their homes — has dropped to its lowest level since the end of World War II.

Homeowners' portion of equity slipped to from a revised 47.5 percent in the previous quarter. That was the fifth quarter in a row below the 50 percent mark, the Federal Reserve said Thursday.

The total dollar value of equity also fell for the fourth straight quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans' total mortgage debt rose to $10.6 trillion from $10.53 trillion.

A homeowner's equity is the market value of a property minus the mortgage debt. And homeowners' percentage of equity has declined steadily even as home values surged during the housing boom due to a jump in cash-out refinancing, home equity loans and an increase in 100 percent financing.

Experts expect equity to decline further as falling home prices erode the value of Americans' largest asset, dragging more homeowners "upside down" on their mortgages.



Read more: http://www.msnbc.msn.com/id/24988315/

Jesus Gawd when will the utter madness stop?

:loveya: :woohoo: :loveya: :woohoo: :loveya: :woohoo:

Good to see ya.

I lose all my equity. This is the thing that will stop the decrease in values. People like me will not sell below a certain price.

i want to start a business -- i need to sell my house -- can't happen unless the values are strong.

People can't get loans, they don't want to drive so far to work because of gas prices and they are waiting until the market bottoms out.

Neighboring properties are in trouble and are forced into foreclosure or short sale; that becomes the new price floor. You may have to wait 6-10 years for your property to appreciate back to todays levels.

In 6 -10 years, petrol will be so expensive that suburbs and exurbs will begin to resmble ghost towns.

If you've got a house worth say $200k with a $100 mortgage and you sell it to buy a $300 house with a £200k mortgage then of course the equity level will fall when multiplied up across the country with similar instances. I only used those figures as illustration to demonstrate a point. It's been compounded by owners releasing eguity and spending the funds other than on property. Needless to say the mortgage debt has risen proportionately.

Thanks to the plethora of fake mortgages (option ARM's, no-doc, Alt-A, etc.), there was an influx of easy-to-get mortgage money which drove prices of houses into the stratosphere. Houses selling for $100K ten years ago were selling for $700K a little over a year ago. This is just insane, but it was sustainable because WalMart employees could get a no-doc loan and buy a $700K house.

It's good that this is happening because it will result in housing prices correcting back to where they should be. Typically, an average house should cost about 2 - 3 times the median annual income for a given area. Instead, we were getting up into the 4 - 5 times range solely because anybody could get a mortgage when, in fact, many of these people would never have qualified.

Now that people have to actually document their income and expenses to get a loan again, the market has dried up. Well, not entirely. In areas where there have been sufficient corrections (down 20 - 50% depending on the area,) sales have begun to pick up, although they are still down year-over-year. Most large cities have two year's of unsold inventory when a healthy market has about 90 days inventory.

It will take a few more years for this to shake out. The option-ARM bubble won't burst until 2010-2011 when most of them reset and become REO's, foreclosures or short sales.

But gone are the days when you can buy a house, install granite counter tops, and resell it for 60% more than you paid.

If you bought your house in 2006 or early 2007 (the peak of the bubble,) you're in a very tough spot because the equity you've lost won't be coming back for many years.

over 50% of them could be insolvent. In addition to Bear Stearns - Wachovia, WaMu, and Wells Fargo may very well be in trouble. Loan delinquency is rising rapidly in prime mortages, at a rate faster than subprime. Option-ARM recasts will crush the housing market from 2009-2012, especially in California, Nevada, and Florida. Lenders are starting to tighten up loan requirements and appraisals; no more NINJA, Liar, 80/20's, 28/2's, and 27/3's loans.

Meanwhile rates will increase as interest rates rise which adds up to lower loan amounts. With wage pressure increasing, housing prices have to compensate; this means serious downward pressure on home prices. By 2011-2012 most home buyers who bought in 2003 or later will be close to upside down on their mortgage. Forget subprime - Recasts of prime Option ARM loans is the neutron bomb of the housing crisis and that hasn't even started yet. We're at the bottom of the 2nd inning.

:nopity:

are the ones that get my dander up. Prima Donnas that buy a house and then rant and rave at their subs because it takes longer than they think, or there are problems hidden in the walls - cry me a freaking river.

The people who went in a sweated their way to an equity gain, I don't have much of a problem with them. The ones who contracted out all the work - I hope they lost their shirts.

What did the flippers have to to with banks' decision to lower lending standards?

The Fed is really the guilty party due to record low interest rates. But the speculators added fuel to the fire creating an escalating spiral in housing prices. The bubble must now be popped and prices restored to real value before the economy can recover. That may be quite a while, several years at least.

I'm not really angry at anyone, just making observations on what I see. The people who thought they could make some quick bucks by buying a house and having someone else fix it up took on an inappropriate amount of risk, IMO.

It's fully the equivalent of deciding you want to open say, a floral shop without knowing a thing about flowers or running a business. Granted, a bank that gives a easy loan without a sound business plan should be scorned. However anyone who makes a major investment without knowing what they are doing should get the lion's share of the blame for a failure.

because they were turning mortgages into asset-backed securities and ran out of good mortgages by 2002. They needed to keep feeding the beast after that so that their CEOs could make 10s of Ms (and mortage brokers could make their 10s of K) on transactions, and they didn't care how the economy, society and homeowners would be effected.

To imply that "flippers" were morally reprehensible for buying and selling homes while the real levers of power are forcing these bubbles is like telling your grandmother not to buy a kruggerand while the a handful of wealthy corps and families fix economies and the precious metals industry to force a bubble in gold prices.

I saw it all around me when I lived in the DC area. I could have gotten in to the game, but I chose not to because I thought it was wrong (and I wasn't willing to assume the risk). Not sure if I'd go as far as "morally reprehensible," however, so don't put words in my mouth. I'm no expert at these matters, but common sense and a basic understanding of the fundamentals told me the housing market was a disaster waiting to happen. And guess what? I was right. And I'm living mortgage-free in a lovely townhome since I sat back in my teeny condo, watched the insanity around me, and cashed out when the gettin' was good.

And yes, I acknowledge your point about banks lowering lending standards. It should not have been allowed. As I've stated elsewhere in this thread, there is plenty of blame to go around.

I've seen it happen more than a few times. If the equity in house drops enough, the LOC might just be shut off.

mikey_the_rat

In mine, the lender has the option of closing out the HELOC if my loan-to-value ratio slips below a certain point.

Even with the recent decline in the market I am still in very good shape (bought in 1994 and owe less than $100 K on my first).

ah those wonderful ideas dating backing to Reagan..and they still hail that creep as some kind of god.

on the part of many. Or those not fully understanding the risk involved. Or those who understood the risk, but assumed it anyway. Or those who used their homes as ATMs and got in way over their heads. Some 20-something said to me about 5 years ago that home prices NEVER go down. He's been in his townhome for that long and has barely made $10K, and he's in shock.

There's plenty of blame to go around.

http://www.thisamericanlife.org/Radio_Episode.aspx?sched=1242

Some of the homebuyers who share the blame include a guy who's mortgage broker lied on the mortgage application without his knowledge about his income -- he shouldn't have even qualified for the loan he received. The broker made something like $30K on the transaction.

their home. It's a blue chipper. The dividend is that you get to live in it while you own it. That's what's important to me. The dividend.

'nuff said

Uh oh, wait a minute... :evilgrin:

bureau this year for a reduction of our real estate taxes.