moneycentral.msn.com/articles/invest/extra/7686.asp
More homeowners are using their houses as extensions of their checking accounts. This means homeowners have more collateral to borrow against. What the broad figure doesn't tell you is the stunning advances that are occurring in some areas. Basically, homeowner collateral and borrowing power is increasing faster than our ability to pay the money back. But the bothersome fact is that home mortgage borrowing is becoming a handy finance tool, the equivalent of your personal IPO. Long before he became chairman of the Federal Reserve, Greenspan was an economic consultant. His research answered a nagging question that followed the second oil price shock in 1979. The question: If stock prices were sinking and inflation was raging, what was keeping the economy going? We were refinancing existing home mortgages to get lower rates, longer terms and a nice big check. That means we owed only 32% of our homes' market value and had 68% equity. We've now borrowed 45% and have reduced our equity to 55%. In the same period, home equity lending grew from infancy to ubiquity. These loans, which barely existed in 1980, totaled $420 billion in 1997 and were growing fast. Whatever the figure is today (it's not regularly tabulated), we're owing more and owning less. Like most statistics, the big aggregate numbers hide how things are distributed. An impressive 38% of all homeowners have no mortgage debt. Thirty-eight% of all homeowners own their houses free and clear. The other 62% are carrying all the debt -- and some of those owe a lot less than others. Just as 30% of all credit card holders no longer carry a monthly balance, leaving the remaining 70% responsible for all credit card borrowing, homeowners are dividing into two distinct camps: -- Those with little or no debt. Resources 47 Read/Post comments on the Start Investing message board 48 Find a problem in this article? Search MSN Money 50 tips Go MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.
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