Home Equity Declining Rapidly In America

Posted on July 3, 2007

The notion of owning your home outright use to be a pinnacle of middle class American financial success. In today’s economy that thinking tends to be a thing of the past with people more concentrating on how much their home’s value increased in the past year and then taking a home equity loan out to tap that money. The NY Times recently ran an article with the below statistics:

“The culture of “own your home free of debt as soon as possible” had endured for decades. Through the 1960s and ’70s, owners’ equity ranged from 65 to 70 percent. As recently as 1983, some 52 percent of American homeowners who were 55 to 65 years old owned their homes without any mortgage debt — allowing them to be free of monthly installment payments during their retirement years. By 2004, however, that percentage had dropped to 36 percent, according to Federal Reserve data.”

I have a home equity line of credit on my home just like the rest of America. However, my strategy was to completely pay it off, and now it serves as a last resort emergency fund in the event I need to tap a large amount of money quickly or I lose my job and need to temporarily sustain myself. All home improvements I use savings that have been allotted for home projects. It can be too much of a addictive cycle to depend on home equity lines of credit to finance home projects on a regular basis. Proceed with caution and understanding when using home equity to finance an upgraded lifestyle especially when the interest rates are steadily increasing.

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.