Equity Losses Aren't Felt Evenly

As a homeowner, seller or buyer, what should you make of the Federal Reserve's latest report on Americans' declining home-equity positions?

Panic? Mild concern? No big deal?

The dollar losses involved were huge and sobering. On a national basis, they document the personal financial impact of falling home prices, especially in the frothiest boom markets of California, Florida, the mid-Atlantic states and New England.

But it's important to keep the Fed's numbers in perspective. They may not reflect your housing situation, your neighborhood, or where you want to buy or sell. It all depends on when you bought, and where.

With that caveat in mind, here's a quick overview of the home-equity estimates assembled by the Fed and released last week:

· To no one's surprise, home-equity holdings on a national basis got creamed during the past year. Homeowners lost an estimated $879.6 billion in net equity wealth -- that's the difference between the current market values of their houses and their current mortgage debt. In the first quarter of this year alone, estimated national equity losses totaled $399.1 billion.

· Americans' equity in their homes represented just 46.2 percent of their properties' market values during the first quarter of this year. Put another way, total mortgage debt exceeded owners' equity and constituted almost 54 percent of total home values.

· The Fed's estimate of a nearly $880 billion loss of home equity wealth may strike you as shocking, but look at that number with some recent perspective. During the housing boom years, nearly $3 trillion in net equity was racked up in a few years as prices exploded in local markets with high levels of speculative investments powered in part by low interest rates and funny-money mortgages.

Here's a crucial fact, however: Depending on where you own property, these wild gyrations of equity growth, followed by equity shrinkage, may not mean a lot.

"I don't think numbers like an $880 billion equity loss are all that meaningful for most individual homeowners," said Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association and an expert on real estate cycles. "When you look at home price data over the last five years, you find that large parts of the country never got caught up" in the boom and bust cycle.