Home Equity Falls To Lowest Level Since World War II
The Associated Press reported on June 6th that home equity has “dropped to its lowest level since the end of World War II.” At the end of March, almost 8.5 million homeowners had negative or no equity in their homes, according to Moody's Economy.com chief economist Mark Zandi.
"For most, their home is their key asset. If they have no equity in their home, likely their net worth is negative, too. Their entire balance sheet will be underwater," Zandi advised.
On Thursday, June 5, the Federal Reserve confirmed that homeowner equity slipped to 46.2 percent in the first quarter, down from 47.5 percent the previous quarter. The Fed’s statement noted that this marked the fifth consecutive quarter during which home equity fell below the 50 percent mark.
Homeowner equity is the market value of a property less the mortgage debt. Homeowners’ percentage of equity has continued to decline steadily even though home values surged as a result of cash-out refinancing, home equity loans, and an increase in 100 percent financing.
The total dollar value of equity fell to $9.12 trillion from $9.52 trillion during the last four quarters while total mortgage debt rose to $10.6 trillion from $10.53 trillion.
