Average US equity in Homes falls below 50% for the first time since 1945

From CNBC:

"Americans' percentage of equity in their homes fell below 50 percent for
the first time on record since 1945, the Federal Reserve said Thursday.
Homeowners' portion of equity slipped to downwardly
revised 49.6 percent in the second quarter of 2007, the central bank reported in
its quarterly U.S. Flow of Funds Accounts, and declined further to 47.9 percent
in the fourth quarter -- the third straight quarter it was under 50
percent.
That marks the first time homeowners' debt on their houses exceeds
their equity since the Fed started tracking the data in 1945."

My only reaction to this is wow. We are witnessing the greatest housing downturn since the great depression. This is how bad it is folks. I think this speaks for itself.

The Mortgage Bankers Association also came out with their foreclosure data for the 4th quarter:

"The news follows a report from the Mortgage Bankers Association on Thursday that home foreclosures skyrocketed to an all-time high in the final quarter of last year. The proportion of all mortgages nationwide that fell into foreclosure surged to a record of 0.83 percent, while the percentage of adjustable-rate mortgages to borrowers with risky credit that entered the foreclosure process soared to a record of 5.29 percent."

More bad news. Foreclosures are soaring. When you add in the number of people that are past 30 days due about 10% of all mortgages are either going into foreclosure or have people that are behind on their mortgage payments.

So after the bad news hits and the housing boat takes another hit the bow, Citibank drops a bomb:

"NEW YORK--(BUSINESS WIRE)--Citi today announced it intends to reduce residential mortgage assets in its U.S. mortgage business by approximately $45 billion over the next 12 months, a 20 percent decrease from December 2007 levels, and will cut the amount of new loans to be held in portfolio by more than 50 percent in the next year. In addition, the company will integrate middle office and support areas to serve both first and second mortgage operations, organize sales channels around customer segments, and strengthen ties with Citi Markets & Banking, which will be the primary provider of capital markets services to its U.S. mortgage business going forward. Citi expects these changes to reduce expenses by approximately $200 million on a run rate basis within 12 months."

Why is this so bad? Because the mortgage pool is shrinking and de-leveraging by billions of dollars everyday. The mortgage "pool" of lending dollars was reduced by $45 billion in one day!! Astounding....

What this means for the home buyer is banks are now less willing to lend and it will result tighter lending standards and higher mortgage rates. When this news hit the wire the already "spooked" lending mortgage markets sent rates higher.

Mortgage rates on the 30 year rose another 10 basis points just today. These moves we are seeing daily on interest rates usually happen over the course of a month or a quarter.

What Citibank is basically saying is we no longer think housing is the place to be and we want to pick up our toys and not play anymore and go home. The FED is pleading for the banks to continue to lend. Well I guess after you lose billions of dollars(Citi in one quarter alone wrote down 16 billion in bad loans) maybe you decide its better to survive then it is to continue to lend and lose money.

This news should rattle the stock markets tomorrow and if the jobs report is bad then you could see quite a big drop in stocks. All of the above news will continue to send housing lower. The Citibank news is a devastating blow to the already battered lending market.

Bottom line: NOW IS NOT THE TIME TO BUY.