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Growth in Equity and Loan to Value

We shared the incredible growth of equity in US Households... caused by price appreciation (and a possibly misguided effort to pay off housing debt as quickly as possible.)

Growth in equity impacts LTV (loan to value). LTV is the loan amount divided by the property value. If you have a $100,000 loan on a $200,000 property you have a 50% LTV. As consumers have paid down debt, and property values have increased, LTV has now dropped closer to 30% matching the record lows back in the early 1970s and 80s.

Insight: This should dramatically mute any major housing bubbles like the housing bubble in 2007-2008 as it was largely driven by extremely low down payment programs that made the housing market a great deal more fragile than it is today. Low LTVs provide a much more stable market as a drop in housing prices don't scare off owners and encourage new buyers.

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