Foreclosures at record as household wealth falls

By Joanne Morrison

WASHINGTON (Reuters) - U.S. home foreclosures hit a record late last year amid a shakedown in the subprime mortgage market that is taking its toll on the broader economy, and the net wealth of U.S. households fell for the first time in five years, data on Thursday showed.

The Mortgage Bankers Association on Thursday also said the mortgage delinquency rate hit its highest since 1985 in the final three months of 2007. While the rate of failing loans swelled across most mortgages, it was led by a growing wave of subprime borrowers unable to make payments.

Adding to that, the Labor Department reported the number of workers remaining on jobless benefits is holding at the highest in nearly two and a half years. For retailers, the story also is not so bright as they posted mixed February sales results, with some signs of struggle as cash-strapped consumers favored outlets where they could save money.

"The epicenter of the U.S. economy's current predicament is housing," said John Lonski, chief economist at Moody's in New York.

Federal Reserve data showed the net wealth of U.S. households fell for the first time in five years in the fourth quarter last year as the value of real estate holdings and stocks weakened.

The U.S. central bank's "flow of funds" quarterly report showed the net worth of American households dipped nearly 1 percent to $57.72 trillion in the final three months of 2007 from a revised $58.25 trillion in the third quarter.

The last time that quarterly net worth fell was in 2002.

The Fed report also showed the percentage of equity that Americans have in their homes sank to the lowest level since 1945. Homeowners' percentage of equity fell to 47.9 percent in the closing quarter last year from 48.9 percent in the third quarter and 49.6 percent in the second quarter.