Homeowner equity is lowest since 1945 - Biz Week

[details at http://www.philly.com/inquirer/breaking/business_breaking/20080306_Americans_home_equity_lowest_since_1945.html]

Americans' percentage of equity in their homes fell below 50% for the first time on record since 1945, the Federal Reserve said. Homeowners' portion of equity slipped to downwardly revised 49.6% 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% 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. Moody's Economy.com estimates that 8.8 mln homeowners, or about 10.3% of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 mln households, or 15.9%, will be "upside down" if prices fall 20% from their peak... 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. The threat of so-called "mortgage walkers," or homeowners who can afford their payments but decide not to pay, also increases as home values depreciate and equity diminishes. Banks and credit-rating agencies already are seeing early evidence of this.