Home ownership has, in the last couple of generations, been seen as a key way to build personal wealth. For the last five quarters, however, Americans have owned less than half the worth of their homes. In some cases, of course, debt has not risen, but the value of the home has declined, so the debt-to-value ratio is out of whack.
The Associated Press explains:
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.
At the end of March, nearly 8.5 million homeowners had negative or no equity in their homes, representing more than 16 percent of all homeowners with a mortgage, according to Moody's Economy.com Chief Economist Mark Zandi. By June 2009, he estimates that will increase to 12.2 million, or almost one out of every four homeowners with a mortgage.
But to put that number in perspective, one out of every three homeowners owns their properties free and clear, with no mortgage at all.
