A 'Double Dip' Chart to Start Your Weekend

Looking for a "double dip" chart to start you weekend? So much the better if it makes you feel even worse about the housing market, you say?

Well then, check out this ugly beast.

Invictus, at Barry Ritholtz's, TheBigPicture.com has pulled data from the latest Flow of Funds (Z.1) report released todayfrom the Fed to create "chart porn".

Of particular interest is the chart you see reproduced here: Owners Equity as a Percentage of Household Real Estate.

What you're looking at is basically this:

From 1985 to around 1999, nearly fifteen years of gradual erosion of equity—totaling an approximate decrease of about 10 percent.

Then, a slight recovery and five years of sideways movement at the decreased level.

Around 2005 you hit the cliff face. From about 60 percent equity numbers the drop to under 40 percent. Closer to 35 percent in fact.

Then, at the end of 2008, a year of recovery—short and sharp—bouncing the average equity percentage above 40 percent again.

Now, the data are once again trending down.

Invictus includes a prescient excerpt from Josh Rosner, of Graham Fisher—which dates back to 2001, quoted in part below:

"These impacts would be exacerbated by the increasing debt burden of the U.S. consumer and the reduction of home equity available in the home. Although we have yet to see any materially negative consequences of the relaxation of credit standards, we believe the risk of credit relaxation and leverage can't be ignored. Importantly, a relatively new method of loan forgiveness can temporarily alter the perception of credit health in the housing sector. In an effort to keep homeowners in the home and reduce foreclosure expenses, holders of mortgage assets are currently recasting or modifying troubled loans. Such policy initiatives may for a time distort the relevancy of delinquency and foreclosure statistics. However, a protracted housing slowdown could eventually cause modifications to become uneconomic and, thus, credit quality statistics would likely become relevant once again. The virtuous circle of increasing homeownership due to greater leverage has the potential to become a vicious cycle of lower home prices due to an accelerating rate of foreclosures."

Eerie isn't it?


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