Our Shrinking Home Equity

My hat is off to the folks at the financial industry trade publication Investment News for creating this fascinating and frightening table showing how America’s home equity has withered over the decades.

The big news here is that for the first time in at least 63 years, the amount of equity we have in our homes has fallen below 50%. In 1945, for example, Americans held residential real estate worth $116 billion and had borrowed $18 billion against that. That’s 84% equity or a loan-to-value, as mortgage folks call it, of just 15%. Last year the percentage of equity stood at 48%.

What’s particularly startling about that number is that even though the total value of America’s homes doubled since 1998 to more than $20 trillion dollars, the total mortgage debt grew even faster. It now stands at $10.5 trillion.

Although the percentage of equity has been declining for decades it hasn’t done so continually. From 1960 to 1985 it held relatively steady at 69%. The source for this data is the Federal Reserve.