That fact, reported Thursday by the Federal Reserve Board, comes on the heels of another report from the Mortgage Bankers Association that home foreclosures skyrocketed to an all-time high in the final quarter of last year. The proportion of all mortgages nationwide that fell into foreclosure surged to a record of 0.83%. In Wisconsin, the picture was a bit better, with 0.78% of mortgages falling into foreclosure, the association said.You need to remember that it was after the end of World War II that saw the rapid growth of the American middle class.
Together, the two reports raise a question about how quickly the nation will be able to reverse its economic slowdown.
The decrease in equity - the difference between what your property is worth and how much you owe on your mortgage - creates a "negative wealth effect" with people unable or unwilling to tap equity to buy consumer goods, said Carl Tannenbaum, former chief economist for La Salle Bank in Chicago and now an independent economist.
"We really can't afford another body blow to the category that accounts for 70 percent of our Gross Domestic Product," he said, referring to consumer spending. "How people react to what is happening to their property values will go a long way toward determining whether we have a recession or muddle through for six months."
After that, he expects the stimulus payments recently approved by the president and Congress to kick-start the economy into a higher gear.
The Fed said that in the fourth quarter of 2007, the average homeowner nationwide had equity of only 47.9% - the third straight quarter it had fallen and was under 50%.
According to newly revised numbers released Thursday, the 50% benchmark was broken in the second quarter, when equity was 49.6% - the first time it has fallen below 50% since the Fed started making the measurement in 1945.
Republican policies that encouraged greed with a lack of oversight has destroyed 60 years of progress. Remember that when you vote in November.