Home Equity Below 50 Percent Level

USA Today (03/07/08) P. 1A; Block, Sandra
The Federal Reserve reports a drop in homeowners' average equity to 47.9 percent at the end of last year, marking the first time the rate slipped below 50 percent since 1945. Although drops in home equity were reported prior to the most recent housing boom, experts say the new report highlights the struggle homeowners face to keep their homes amid rising mortgage rates and falling home values. HSH Associates Vice President Keith Gumbinger attributes the decrease in home equity to large numbers of low- and no-down-payment mortgages, home equity lines of credit and cash-out refinancings during the boom years. Meanwhile, Economy.com predicts 10 percent of residential properties, or 8.8 million, will be valued at less than their mortgage balances by the end of the first quarter. However, DataQuick real estate analyst John Karevoll says homeowners in neighborhoods that failed to record substantial home-price appreciation during the boom have 70 percent equity or more.