Home Equity Hits New Low

The Federal Reserve on Thursday announced that, in 2007, American ownership in their homes as measured by equity fell below 50 percent for the first time since records were first kept in 1945.

During the 2nd quarter of 2007 the central bank reported that homeowners' equity slipped to a downwardly revised 49.6 percent and slipped further to 47.9 percent in the fourth quarter. This was the third straight quarter that equity was under 50 percent.

Home equity is a measure of the market value of the home minus the mortgage-related debt. Because Americans have repeatedly cashed out the equity in their homes through cash out refinancing, home equity loans and high loan to value mortgages, equity has steadily declined even in the midst of the surging prices of the housing bubble.

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.

In related news, the Mortgage Bankers Association released its fourth quarter delinquency report which showed the home foreclosures and the number of homes entering the foreclosure process both rose to record highs.

Most of the foreclosures and delinquencies could be tied to subprime loans where the delinquency rate (usually loan payments 60 or more days late) was up 1 percent from the third quarter to 17.31 percent of all outstanding loans. The delinquency rate for all loans was 5.82 percent, up from 4.95 percent one year earlier and the highest since 1985. In addition, 0.83 percent of loans entered the foreclosure process during the fourth quarter. This surpassed the previous record of 0.78 percent during the third quarter. One year earlier the rate was 0.54 percent.

Late payments, those 30 or more days overdue, also set a new record of 20.02 percent of all loans in the fourth quarter. The previous record was set in the third quarter at 18.81 percent.

Read More: Mortgage Bankers Association, Mortgage Bankers Association