Los Angeles Times:
Blogger CalculatedRisk took a look at the Federal Reserve's latest estimate of the equity Americans have in their homes and found it overly optimistic on its face. And not by a little.
The Fed's quarterly tally of U.S. households' aggregate balance sheet, issued Thursday, as usual included an estimate of homeowner equity -- the market value of houses minus mortgage debt owed.
Home debt greater than equity for first time since '45 - USATODAY.com
Equity in Americans' homes falls to historic low - Mortgage Mess ...
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About 20% may be the national average, but it's more like -35% here in Las Vegas... and dropping. When it's all over I think the net drop will be something like 50-55% from the 2006 peak.
A person should only be able to buy one home at a time and live in it to qualify.
Homeowners have about 20% equity? That's just about equal to adown payment. Interesting.
Take back the trillions of $$$ given to the banks, who just sit on it and make it totally ineffective then start government incentive to create realistic industries that give employment and generate real productive income, some of which would hopefully be from exports.
Every other country, especially China and most of Europe have goverment incentives to protect it's industries. No matter what you call it it's a form of protectionism and its inevitable. We should stop being naive and take care of our own house. The only ones who win if we don't are the multinational corporations who don't care where they get their hand out.
good articles for a slow news day: http://www
The only way you can 'lose equity' is if you are in an interest only loan and paying only the interest OR if you took out second or more mortgages on your home.
Equity is a measure of a mortgaged property. It should never be applied to mortgage-free properties. There need to be two figures: 1 What percent of homes are owned outright? and 2 What is the aggregate equity share of mortgaged homes?
Read the article.
I have been renting for quite a while.
I would seriously try to buy now that prices are coming down if Obama and the feds would get their butts out of the market.
How can I know the true price of real estate when the government is manipulating the market?
If equity drops another 10 percent, my son will finally be able to buy a house. This is good news.
If equity drops to 0% does that mean that everybody who doesn't have a home gets one?
The headline is misleading and the statistics do not support it.
If more people had 100% equity (because they bought what they could afford and either paid cash or paid off their mortgage quickly) we wouldn't be in this mess now would we? A more relevant point that more reporting should be making.
Instead we get the passive voice which implies that people are just victims of "the system" through no fault of their own. We all are affected by the downturn, but people who hyper leveraged their purchases are more acutely affected ... but 'news' reports never make that point.
The statitistic that is relevant is the number of people OVERALL who have little or no equity in their homes ... and you can't get that number by removing people who have 100% equity. The same people who have little or equity now, had little equity before the downturn as well.
Also, if you want to get into wacky statistics (which this site seem to enjoy) when home value goes down, the mortgage holder's % equity relative to value of the home goes up! Not so with a person who has paid off their home. Their equity to home value goes DOWN.
Lol, I thought about the equity conundrum but when reading the article and noting the government statistics, got equally lulled into "the system" (and hung up on why they would strip out paid-in-full housing as if it's an error).
This article is not about how much debt has been paid off compared to home prices (which was my original assumption the concerned blogger was trying to make), it's comparing home values to debt.
The issue you point out is if you buy a house for $200,000 and have paid $40,000 of that debt, you technically have 20% equity in your home ($40,000 of $200,000). If the market value dropped to, say, $160,000, you now have 25% equity in your house ($40,000 of $160,000). Equity has gone UP!
The more interesting figure here is what was total value of houses in the original statistics compared to now. So you're right, for equity to "drop" home values would have to rise. Something is awry...
That's bass-ackward thinking. You have a $160,000 mortgate on a property with $160,000 value. Your equity is ZERO.
An equity is likely to stay down, since home values are only the price you can get the next buyer to pay. Good luck selling, with money tight and jobs on the decline.
c'mon tim, ben....mor
let's get crackin'
If you exclude the equity of those who own 100% of their homes, the figure you get is not for U.S. home equity. It is only for the % equity on the SUBSET of homes that have mortgages. This IS a useful number, but does not represent U.S. home equity. Some truth in labeling is needed here.
I agree with Lorianne who commented earlier. This article is disingenuous. It would have been more clear to say, "ok, the Fed says that home equity dropped by a few percentage points, but we note that were you to take those same statistics and remove those who have paid for their houses in full, the home equity drop is significantly more precipitous and cause for concern among mortgage holders."
There's an implication that the Fed is trying to hide something and there is no evidence to make such an accusation. There's a good point to be made but not in this context.
I know people who have walked away from their homes, but not after a Herculean effort to sell. They even offered to add their own money to an existing offer they received, often in the $30,000 to $40,000 range, yet the bank turns it down. It's hard to believe some would offer to take that kind of hit financially just to get out of an onerous mortgage, and that's after reducing the original asking price by a huge amount. It just goes to show these bankers could care less.
The best investment I ever made was to spend a few hundred dollars on a waterproof, fireproof safe. With what the banks charge for using MY money, I'd rather keep it a few feet away, bolted to the floor. Citibank just charged me $25 last month because my balance wasn't high enough. Screw them.
I got a reassessment of my home value from my township 2 months ago. I lost $30,000 in the value my home; however, they didn't decrease my taxes....
The same thing happened to me, and I lived in a Red district, Dennis Hastert's. So much for the tax and spend Democrats, eh? By doing that, they effectively raised our taxes. They spout off about lowering our income taxes, then they stick it to us in another form of taxation.
the little guys need cramdown more now than ever
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Posted: 06-14-09 10:53 PM