Harney: Still upbeat on equity

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It’s official: The equity boom, which has added an estimated $1.6 trillion to the personal net wealth of American homeowners in the past year, has slowed dramatically. It’s not over by any means. It has just lost some of its previous pep.

In the latest quarterly data from the Federal Reserve, which tracks residential real estate, home equity holdings across the country rose by $177 billion. That sounds massive but it’s actually down significantly from the previous quarter, when equity soared by $452 billion — nudging half a trillion.

Your equity is the difference between the current resale value of your home and the mortgage debt you’ve got on it. If your house would sell this weekend for $300,000 and your mortgage balance is $150,000, you’ve got $150,000 in equity, not counting transaction costs. This is wealth stored away in your own private real estate savings account.

You can sit on it, borrow against it to finance home improvements or college tuitions, and you can factor it into your retirement plans. According to the Federal Reserve, home equity holdings in the latest quarter hit $10.84 trillion. That’s up from $6.4 trillion as recently as 2011. These are big, brain-numbing numbers no doubt, and equity is a crucially important subject for millions of people who are counting on it.

The flip side of the upbeat equity picture is negative equity — underwater homes where debt exceeds resale value. Fifteen percent of all houses with mortgages are still in serious negative equity territory. A RealtyTrac study defines “serious” as owing at least 25 percent more on the mortgage than the resale value of the home.

Bottom line on the latest equity numbers: They’re basically good news. Fewer people are underwater — back in the dark days of the bust, more than half of owners in some of the worst-hit markets were underwater. Plus the slowdown in prices nationwide is healthy. More modest growth in list prices means more potential purchasers can afford your house when it’s time to sell.