New York Nervous homeowners and economic analysts have been wondering how much worse the national housing market could get, and on Thursday they got an answer: plenty.
Nationwide, foreclosures are at a record high. Home equity is at a record low. The housing market is spiraling down with no end in sight - and taking people's sense of economic security with it.
For the first time since the Federal Reserve started tracking the data in 1945, the amount of debt tied up in American homes now exceeds the equity homeowners have built.
The Fed reported Thursday that homeowner equity actually slipped below 50 percent in the second quarter of last year, and fell to just below 48 percent in the fourth quarter.
And that was just one example in a day of dismal housing reports.
The Mortgage Bankers Association said foreclosures hit an all-time high in the final quarter of last year. And pending U.S. home sales - those in the gap between when a buyer signs a contract and when the deal closes - came in below analyst expectations for January and remained at the second-lowest reading on record.
"There is no sign that we're near the bottom in the housing market," said Douglas Elmendorf, a senior fellow at the Brookings Institution and former Fed economist. "Housing prices will probably fall for a year, two or three to come."
The trifecta of reports illustrates a housing market caught up in a "very negative, reinforcing downward spiral," said Mark Zandi, chief economist at Moody's Economy .com.
Home equity, the percentage of a home's market value minus mortgage-related debt, has decreased steadily even as home prices and homeownership rates jumped earlier this decade. That was due to a surge in cash-out refinancings, home equity loans and lines of credit and an increase in no-down-payment mortgages.
Now declining home prices are eating into equity, and economists expect the figure to drop even more.
Economy.com estimates 8.8 million homeowners, or about 10 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households will be "upside down" if prices fall 20 percent from their peak. The latest Standard & Poor's/Case-Shiller index showed U.S. home prices plunging 8.9 percent in the final quarter of 2007 compared with a year earlier.
Experts believe foreclosures will rise as more homeowners struggle with monthly payments as the interest rates on their mortgages adjust higher. Problems in the credit markets and eroding home values are making it harder for people to refinance their way out of unmanageable loans.
The threat of so-called "mortgage walkers," or homeowners who can afford their payments but decide not to pay, also increases as home values depreciate and equity diminishes. Banks and credit-rating agencies already are seeing early evidence of it.
"If you're struggling with payments and you have negative equity in your home, your struggling isn't getting you very far," Elmendorf said. "It's very likely you want to stop and walk away."
Even for those who retain some equity, the effect on consumer sentiment and spending will be profound.
Homeowners, who once happily tapped home equity for expenditures and home improvements, may instead save money as they watch their total net worth wither.