I heard this on CNN over the weekend: "More than 30 percent of U.S. homeowners who bought in the last two years owe more on their mortgage than their house is currently worth." I found that figure staggering, so I did a little research. Here are some statistics that I found.

Why? Good question! For starters, homeowners are starting off further behind than they have in the past. It was once considered standard practice to put 20 percent when buying a home. Now, however, many opt for 100 percent financing. Starting with ZERO equity is a sure way to end with less equity than generations before us. And, when home prices drop it makes it pretty darn easy to wind up upside-down.

But, starting out that way isn't the only way to tumble over - Americans are tapping their home equity like a beer keg at a Delta Tau Chi frat party. (Useless Trivia: Delta Tau Chi was the full name of the fictional Delta House fraternity from Animal House.)

It is certainly not a good trend. It is no wonder that so many Americans are loosing the American dream in foreclosure. As so many people drained the equity in their homes, or never really had any to begin with, the home price declines we have seen really began to take their toll. The old rules of requiring 20 percent down may have kept many people from being able to afford to buy a home, but it did protect them from short term lulls in the housing market - it also protected the lenders.

It really isn't surprising that Americans are using their home as their personal ATM machine to supplement their income. And, who could afford a 20 percent downpayment today? The cost of a home has increased far more than household income. Check out the Mercyman53's Weblog.

The problem we have today is a combination of people's desire to live well beyond their means and the banks' willingness to hand out money like it was printed by Parker Brothers. Because of the ease at which money could be borrowed, people could afford to pay more for homes. Like any thing else, if people can afford to pay more, the price goes up; it's supply and demand. Obviously, this couldn't go on forever. Americans ran out of equity, the banks' endless supply of money began to dry up as investors realized the risk of the mortgages they were sold, and now prices are dropping.

With falling home prices and less equity - many homeowners are upside-down. Foreclosure isn't as scary as it used to be, when people actually had equity in their homes. They don't have much of an incentive to work harder to keep it if it isn't worth what they owe. In fact, many people are actually planning to let their home go, even though they could afford to keep it.

There is no doubt that home prices were due for a correction. And, that really wouldn't be a big deal in the big scheme of things, if Americans had more equity like the generations before them. Perhaps 20 percent down is an unrealistic expectation today, but even a five or ten percent down payment would preserve some equity during minor market corrections. If people actually had some equity in their homes it would make the entire housing market more stable. That is what makes this the worst housing market ever.