On average, home owners now hold about 38 percent equity in their homes, down from 61% a decade ago, the Federal Reserve says in citing data from the first quarter of this year.
Despite outstanding balances on loans getting smaller, home owners are losing equity due to drastically falling home prices, which have inched down in many markets since prices peaked in 2006, the Fed reports.
Home equity is an important indicator to the overall health of the economy because the more home equity people have, the more wealthy they tend to feel. Plus, home equity also tends to serve as collateral for other loans.
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