Falling home prices have eroded the equity that American homeowners have in their homes, as David Wessel observes in his Capital column.
More than half of American home equity is in homes for which there are no mortgages; there never was one or it has been paid off. Of the remainder, the bulk isn’t in homes with high-end jumbo mortgages or in homes with subprime mortgages, it’s in homes with conventional mortgages, the sort backed by Fannie Mae and Freddie Mac.
The situation may have to get worse before it gets better. Most economists in the latest Journal forecasting survey expect home-price declines to continue at least through this year.
Here are the numbers, courtesy of Greenspan Associates, the former Fed chairman’s consulting firm.
Value of Equity in Homes
Total: $8 trillion
Without mortgages: $4.4 trillion.
With mortgages: $3.6 trillion
Subprime negative $0.1 trillion
Alt-A $0
Prime Jumbo $0.6 trillion
FHA/VA $0.1 trillion
Conventional/conforming $2.9 trillion
First lien home-equity loan $0.1 trillion
Source: Greenspan Associates
Where’s the (Remaining) Housing Wealth? – David Wessel, RT Economics
