The U.S. housing market contains a nearly $4 trillion negative equity hole, according to Williams Emmons, an economist with the Federal Reserve Bank of St. Louis.
Emmons made that statement while speaking at HousingWire's 2012 REthink Symposium.
The Fed Bank economist said it would take $3.7 trillion, much more
than the $25 billion mortgage servicing settlement and other federal
housing initiatives, to get homeowners with mortgage debt back to
preferred loan-to-value ratio levels.
Emmons' data estimates the average LTV for those with mortgage debt is currently 94.3%.
That compares to preferred LTV levels among mortgage debt holders of
58.4%, which was the average struck among mortgaged homeowners in the
period stretching from 1970 to 2005. Emmons told the crowd there is no
easy way to fill that gap, and the deep hole is hardly discussed among
the media and policymakers.
"We are sort of stuck in this," he told the crowd. "It's a sweat box
we're in, and we can't get out. We are not talking about this very much …
it's just too ugly."
He added, "It is like the debt that is outstanding is crushing the equity that is there."