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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Elroy Jetson who wrote (25551)12/1/2004 2:52:37 PM
From: GraceZRead Replies (1) of 306849
 
Your calculation is flawed. The reason for this is that the 55% equity calculation is determined from the total value of housing minus mortgage loans outstanding, not by by taking the individual equity values from all available households and averaging them together.

With that data source you don't have enough information to determine where the bulk of equity lay, in those households where there is no mortgage or where there is a mortgage or whether it is spread out relatively evenly over both groups. Without knowing where the equity resides you can't determine the average percentage equity in the remaining 60% of houses with mortgages.

The 40% represents units, the 54% represents a percentage of the macro value of home equity to the macro value of all housing. You can't use these two percentages in the same equation to come up with a reliable figure even though using some other method the percentage you arrived at may be correct. I doubt it, since historically such a small percentage of loans are closed with less than 10% equity and values have risen so sharply since the bulk of the refinancing boom.

I'd hazard a guess that some very low priced housing is wholly owned (the nearby metro area has 35-40 thousand abandoned houses still counted in the national figure of 120+ million or so housing units for which no mortgage is present or available where the aggregate value is close to zero) as well as high priced housing bought entirely with cash. In the middle, the rest of us fall along a pretty predictable bell curve even though it may have been skewed a little in the last three years. That 300 billion cashout figure you are so fond of represents about 7% of the equity gains in the last 5 years.
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