Final answer:
The statement about home equity being the market value minus the debt owed is true. Examples illustrate how equity is calculated based on the home's market value and outstanding debt, which represents an important portion of an individual's or household's wealth.
Step-by-step explanation:
The statement that home equity is defined as the market value of the home less the debt owed on the home is true. Home equity represents the portion of a property’s value that an individual actually owns and it is a key financial asset for many households. For example, if a homeowner, let's say Fred, has a house with a market value of $200,000 and owes $180,000 to the bank, his equity would be $20,000. In the case of Freda, who has a house valued at $250,000 and owes nothing to the bank, her equity amounts to the entire value of the home, which is $250,000. Lastly, if Frank’s house is valued at $160,000 and he has paid off $20,000 of the original $80,000 loan, leaving a debt of $60,000, his equity in the house is $100,000. Overall, the total value of all home equity held by U.S. households is a significant portion of their overall wealth.