Remember when all the pundits were saying how bad it was that people were tapping their home equity lines to pay for things like fancy cars and European vacations?  That was then, this is now:

Falling real estate prices are eating away at home equity. The percentage of their homes that Americans own is near its lowest point since World War II, the Federal Reserve said Thursday. The average homeowner now has 38 percent equity, down from 61 percent a decade ago.

The latest bleak snapshot of the housing market came as mortgage rates hit a new a low for the year, falling below 4.5 percent for a 30-year fixed loan. But even alluring rates have failed to deliver any lift to the depressed housing industry.

The Fed report is based on data from the first quarter of this year. Another report last week found that home prices in big cities have fallen to 2002 levels.

Normally, home equity rises as you pay off the mortgage. But home values have fallen dramatically since the price bubble burst in 2006. So, many homeowners are losing equity even though the outstanding balance on the loan is getting smaller.