Homeowner Equity Declines
Homeowners' equity, as a share of the total value of their property, edged down to 53% at the end of 2006, from 54% in the fourth quarter of 2005. Homeowner equity was almost 58 percent of housing value in 2000 and nearly 70 percent in the 1980s.
Analysts say that homeowners continued to stretch their resources last year, when household savings rates dipped into negative territory, below zero, and that many people might be at the limit of how much they could borrow.
Dean Baker, co-director of the Center for Economic Policy Research, a left-of-center institute in Washington, said the new data raised concerns about both the short-term outlook for economic growth and the long-term retirement security of Baby Boomers.
"Most of the Baby-Boom Generation is near retirement and has few assets outside their homes," Baker wrote in a research note. "If weak house prices reduce equity even further for this group, it will be difficult for them to save enough in their remaining working years to offset the loss."
Source: The New York Times, March 11, 2007
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