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Thursday, December 11, 2008

Fed: Household Percent Equity Cliff Diving

by Calculated Risk on 12/11/2008 12:06:00 PM

The Fed released the Q3 2008 Flow of Funds report today: Flow of Funds.

Household percent equity was at an all time low of 44.7%.

Household Percent Equity Click on graph for larger image in new window.

This graph shows homeowner percent equity since 1952.

When prices were increasing dramatically in recent years, the percent homeowner equity was declining because homeowners were extracting equity from their homes. Now, with prices falling, the percent homeowner equity is Cliff Diving!

Note: approximately 31% of households do not have a mortgage. So the 50+ million households with mortgages have far less equity than 44.7%.

Household Real Estate Assets Percent GDP The second graph shows household real estate assets and mortgage debt as a percent of GDP. Household assets as a percent of GDP is now declining. Mortgage debt as a percent of GDP has declined for the last three quarters.

Rex Nutting at MarketWatch has more: U.S. households pay down debts for first time

Stung by the loss of more than $2.8 trillion in their net wealth, the nation's households paid down their debts in the third quarter for the first time since at least 1952, the Federal Reserve reported Thursday.

As of Sept. 30, households' total outstanding debt shrank at an annualized rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report. It's the first decline in household debt ever recorded in the report.
With the stock market plunging and home prices falling rapidly, American households lost a total of $2.81 trillion in wealth during the third quarter, the most ever. Wealth fell at an 18% annual rate during the quarter.
The S&P 500 closed Q3 at 1,114, so just wait - household wealth will take another huge drop in Q4 too.