If what you owe is more than what the house is worth, then you have -zero- equity. I guess this story is saying more people are upside down than have equity. (?)
When you are upside down on your loan (owe more than the value) I guess you could say it is negative equity?.
No. What they are saying is people OWE more than what they OWN. Which was a very weird way of saying it, not meaningful at all.
The total debt for homes is now more than 50% of the total value of the homes. For an individual, a debt of 50% of the home value is fine — most people would be happy at that value.
But a LOT of people own their homes outright, or owe very little, so in order for the total to be at 50%, a lot of other people pretty much have NO equity, or worse owe more than their house is worth.
But the number itself doesn’t tell you how many are actually negative. With the refinance boom, a lot of people who previously owed a low percentage of their total value because their house went up in value while they paid off their mortgage, were now taking out new loans, often to 80% or 90% debt ratios.
So as they point out, even before the market turned south, the total debt-to-equity ratio was dropping. Again, a lot of financial advisors thought this was a good thing, because your money tied up in real estate was better used investing elsewhere.
Of course, now that home values are dropping, EVERYBODY who has a loan is seeing their “debt-to-equity” ratio increase.