Home equity rises to 2008 levels
Home equity is on the rise in the United States and gained more in the first quarter than in any other quarter in the past 60 years, according to a study of Federal Reserve data by Bloomberg.
Home equity in the first quarter of 2012 rose to 41 percent of residential property value, the highest level since 2008. During the housing crisis, almost 25 percent of homeowners were considered “underwater” on their mortgages, or owing more on their homes than they are worth, according to Bloomberg.
Now, signs are showing that mortgage debt is starting to ease.
“When the market was booming, a mortgage was used as a leveraging tool, and now it’s seen as a risk,” said Richard DeKaser, chairman of the American Bankers Association‘s Economic Advisory Council, in an interview with Bloomberg.
In March and April, the average length of a mortgage dropped to 27 years from 29 years in February, meaning more people are choosing 15-year mortgages, according to Bloomberg.
DeKaser attributed much of the increase in home equity to Americans’ fear of mortgages and fear of the market. He told Bloomberg that many people are worried about another housing crisis, so they are choosing to pay off their mortgages faster and not purchase other large items.