Homeowner Equity Bigger Than You Think

By: Kenneth Harney: REALTOR® Magazine Online
Contrary to what some critics say, U.S. home owners have plenty of equity — 57 percent stakes on average as of the third quarter of 2005, according to research from both the Federal Reserve and First American Corp., one of the nation’s largest title companies.

Not surprisingly, households' equity positions vary by the age of their mortgages. Eight of 10 people who took out their mortgages in 1985 have equity stakes of 75 percent to 80 percent, thanks to pay downs of principal and price inflation. Sixty-five percent of borrowers whose loans date to 1990 now have 50 percent to 55 percent equity positions. Roughly half of 2001 buyers and refinancers have seen their equity stakes grow to 25 percent to 30 percent.

Those who are thin on equity tend to be recent borrowers, according the study. Nearly 30 percent of 2005's borrowers have zero to negative 5 percent equity positions. Nearly one of 10 was in a zero or negative-equity position as of September 2005. Five percent were in negative territory by more than 10 percent. That is, their combined mortgage debts exceeded their home values by more than 10 percent.