Your reply brings up much larger issues. You bring up an interesting point re: average equity. What you left out of that statistic is that average equity has fallen from 70% to 55% since the mid-1980s.
And it would seem that the steady decline in home equity is directly linked to falling interest rates.
Meanwhile, consumer and mortgage debt outstanding has been steadily increasing during this same period.
And it takes ever increasing amounts of household debt to sustain GDP. In fact, household debt almost equals GDP!
I argue that these are unsustainable numbers and scream recession or worse. Real estate is just one piece of the puzzle, but a real estate bust could easily initiate the "doomsday scenario" that so many on this thread do their level-best to deny. Do the above stats strike you as a conservative approach to finance/spending/economics? I could go on posting charts ad infinitum. For instance, in addition to the charts above, the USA has long running budget, current account, and trade deficits. And then there is the 8.5 trillion dollar national debt. In short, we are a nation of debtors. And nobody in either party seems to be willing to do anything about it, except to print more money, borrow money from foreigners, and encourage the public to go into even more debt.
In short, instead of resting on broad BLACK base, our economy is balancing on an ever narrowing tip of RED.
Why? Because the Fed engineered 2 separate periods of very low short rates in the first half of each decade, and because the rest of the world has sent rates to near zero and left them there. Japan has not be bidding for capital at all, instead shoveling its savings out to the rest of the world with 0-1% rates for the past 15 years straight. The Bundesbank has given way to the Euro, and no longer offers 8% interest rates in a sound currency - now it offers 3%, as unemployment remains stubbornly high across the EU. China meanwhile leaves its yuan ridiculously undervalued, taking our nearly printed dollars for goods.
One will not open their capital market, another will not open their labor market, another will not open their consumer market. All capital therefore heads to the US where all are open, IRs while still low are higher than anywhere else in the developed world, business investment actually makes money and those who earn it are permitted to keep it, etc. We reap the rewards of our greater willingness to take risks, as they lend us money for nothing and we buy palaces rising 14% a year in price, or invest in businesses growing their earnings 10-15% per year.
Somebody in the piece is indeed a patsy. But the smart ones aren't those taking freshly minted dollars at tiny interest rates and lending all their capital to others, who are reaping much of the rewards of other's savings and other's work.
When you borrow money from your credit card to buy gold, is that debt bad?