Housing Market Slumps Furthur

Among the latest trouble signals, the number of American homes entering foreclosure rose to the highest level on record in the fourth quarter of 2007. Meanwhile, homeowners' share of the equity in their homes fell to a post-World War II low. The unwelcome contrast provides stark evidence of how falling home prices are weighing on consumers. And it could add urgency to efforts by Federal Reserve officials to avert a larger wave of foreclosures by prodding lenders to reducing the principal -- or total amount owed -- on troubled mortgages Their share of home equity -- the market value of a home minus the size of its mortgage -- dropped to 47.9% in the final three months of 2007, down one percentage point from the third quarter, the Fed said in a quarterly report. Equity as a percentage of home values has been falling from a high of more than 80% since 1945, when the data started being recorded, but that decline generally has been a result of mortgage debt rising faster than home prices. The total wealth of American households slipped about $533 billion to $57.7 trillion in the fourth quarter, the first drop since 2002, the Fed said. Central to the decline: The value of housing-related assets -- including those that are mortgaged -- fell by $170 billion to $20.2 trillion while the value of other financial assets, such as stocks, dropped by $254 billion to $45.3 trillion. According to the Mortgage Bankers Association, more than 2% of the nation's about 46 million mortgage loans were in the foreclosure process in the fourth quarter, and 0.83% of loans entered the process. Both figures are the highest since the industry group started keeping track in 1972. The delinquency rate for home loans hit 5.82%, up almost a quarter percentage point from the previous quarter and the highest since 1985, when the rate topped 6%, as many regions of the country were hurt by slumping oil and farm-product prices.