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Americans' home loan debt is decreasing

Posted on Monday, June 18, 2012 at 6:35:06 PM

According to Federal Reserve data, home equity recently experienced the largest gain seen in more than 60 years. The increase represents the growing trend to pay off debt – a change from previous American practices. Home equity rose to $6.7 trillion in the first quarter of 2012, the highest level since 2008.

"The willingness of homeowners to carry housing debt has been radically altered," said Richard DeKaser, former chairman of the American Bankers Association’s Economic Advisory Committee, according to The Washington Post. "When the market was booming, a mortgage was used as a leveraging tool, and now it’s seen as a risk."

The change in debt trends is partially to blame for record-low mortgage interest rates, potential homeowners making large downpayments and strategic home financing choices. Home equity was 41 percent of U.S. residential property value for the first three months of 2012. The last time it was so high was in the third quarter of 2008, when it hovered at 43 percent.

As debt levels decrease, more Americans will find themselves on stronger financial ground.ADNFCR-16001052-ID-800799390-ADNFCR