Home Equity Plunges

Physician's Money Digest, November15 2004, Volume 11, Issue 21

Another problem:

Although real estate values have rocketedover the past several years, Americanshave far less equity in their homesthan they did 2 decades ago. Back then,total equity as a percentage of real estateassets stood at 70%; today it's down to55%. Higher prices are actually part ofthe problem, as Americans pile on mortgagedebt to move into the home of theirdreams. The increasing use of home equityloans and lines of credit has also cutinto equity levels. Today, total mortgagedebt in the nation stands at a staggering$6.9 trillion. Servicing that debt, economistssay, is leaving little left for savingand investing. If realestate values drop, homeowners with littleequity could find that they owe moreon the house than they can sell it for.