Worst Real Estate Equity in 40 Years?!!

Yes Shelby:  I heard that too this afternoon on the radio on the way home.  I think the fifty percent mark is because of two things.  First, in many areas, property values are dropping, and in doing so, homes obviously have less equity.  But secondly, and definitely as important, is the fact that because of the economic slow-down... many home owners have taken out equity loans, and have used that money either for improving their home, paying off bills, just buying new stuff, or... as in many cases... just using the money to live on.  That would take care of quite a bit of each home owner's former equity.  Unfortunate, but probably true.  Shelby... thanks for sharing.

Now... in re-reading your post before I was going to hit the submit button, I took the radio announcement to mean actual "equity" in the home.  Which means... a home with a $200,000 loan balance, that was worth perhaps $500,000 two years ago... at that time the owner had a home with $300,000 equity.

If the value of that same home dropped by $75,000, they would have a property worth $425,000 with a loan balance of $200,000... leaving $225,000 in equity.  That alone, is a 25 % drop in equity.

If perhaps, that same seller took out an equity loan last year, while appraisals were still coming in as they had been... the seller may have taken out another $100,000 home equity loan... leaving them a property now worth $425,000... with a loan balance... $200,000 original plus $100,000 equity loan... equalling a total loan balance of $300,000.  That would mean a home valued at $425,000 with a total loan amount of $300,000... would now only have $125,000 in equity.

So... going back to the beginning... in the original case, the owner's "equity" was $300,000.  Now, after the drop in value, and after the equity loan, the owner's "equity" is now $125,000.  That would mean that as of now... the owner's equity was 41.7 % of what it was a few years ago.  That would mean that the owner's equity had dropped about 58.3 %  That is my take on what I think they meant.  I could be wrong, but that is my take.  Again, thanks for sharing.  I hope my examples and numbers made sense.  Take care...