by Calculated Risk on 12/07/2006 01:43:00 PM

The Fed reported today that houseowner equity, as a percent of market value, fell to a record low 53.6%, compared to 54.0% in Q2, and 54.6% one year ago.

Homeowners borrowed almost the entire amount that their homes increased in value in Q3. Homeowner equity market value increased $194.5 Billion in Q3, to $20.48 trillion. Meanwhile homeowners mortgage debt increased $180 Billion. So homeowners borrowed 92% of the increase in market value.

Click on graph for larger image.

Note: Graph doesn't start at zero to better show change in percent equity.

This may sound like a high percentage of equity, but according to Robert Broeksmit, Chairman of the Residential Board of Governors, Mortgage Bankers Association (from the Senate hearing on Wednesday):

"More than a third of homeowners, approximately 34 percent, own their homes free and clear."

So many of the remaining homeowners have a very low percentage of equity. Note: Typically free and clear homes are older and have a lower market value than newer homes - so you can't just subtract 34% from 53.6% to find the percent equity of homeowners with mortgages. But this probably indicates that more and more homeowners have maxed out their "home ATM".

If house prices stabilize or fall over the next few years, the percentage equity will drop sharply (see 1990). This will make it more difficult for homeowners to extract equity from their homes.