Americans’ home debt greater than equity for first time since 1945; home prices plunging 8.9% in the final quarter of 2007 compared with a year ago, steepest decline in the 20-year history of the Case-Shiller index.

Excerpt of article published at Tampa Bay’s 10 dot com (click to read whole article): WASHINGTON (AP) — “In a troubling report, the Federal Reserve said Americans’ equity in their homes has fallen below 50% for the first time since 1945.

Home equity is the percentage of a home’s market value minus mortgage-related debt.

The Fed’s flow of funds report shows home equity slipped to a revised 49.6% in the second quarter 2007 and fell further, to 47.9%, in the fourth quarter. It marks the first time homeowners’ debt on their houses exceeds their equity since the Fed started tracking the data in 1945.

The total value of equity also fell for a third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.

Home equity has steadily declined even as home prices jumped earlier this decade due to a surge in cash-out refinances, home equity loans, lines of credit and an increase in 100% or more home financing.

Economists expect equity to drop even further as declining home prices eat into the value of most Americans’ largest asset.

Moody’s Economy.com estimates that 8.8 million homeowners, or about 10.3% of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9%, will be “upside down” if prices fall 20% from their peak. That is, they will owe more than the home’s current market value.

The latest Standard & Poor’s/Case-Shiller index showed U.S. home prices plunging 8.9% in the final quarter of 2007 compared with a year ago, steepest decline in the 20-year history of the index.”