4Q GDP Growth Revised Downward; Fewer Homeowners Under Water; Pending Home Sales Down

Revised GDP number shows annualized rate of 2.4 percent for the fourth quarter of 2013. Also, Zillow data shows fewer homeowners under water, while the NAR reports pending home sales are down.

On Friday, the Bureau of Economic Analysis released its revised, or second, estimate for real U.S. gross domestic product in the fourth quarter of 2013, reporting that real GDP increased at an annualized rate of 2.4 percent for the quarter. The previous advance estimate was 3.2 percent. During 3Q13, real GDP increased at an annualized 4.1 percent.

The second 4Q GDP estimate is based on more complete source data than the advance estimate, which was issued in late January. One of the main differences between the two estimates is that the increase in personal consumption expenditures — PCE, or government-speak for people out spending their money — was smaller than previously estimated.

Despite not growing as much as previously thought, according to the BEA real GDP did grow during the quarter, with positive contributions from PCE, exports, nonresidential fixed investment — including CRE — and private inventory investment, or businesses spending their money. Other contributions to GDP shrank, including federal government spending, residential fixed investment  (housing) and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Fewer Homeowners Are Under Water

Zillow, in its fourth quarter 2013 Negative Equity Report, said on Friday that the national negative equity rate dipped to 19.4 percent of all homeowners with a mortgage, putting the metric below 20 percent for the first time in years. Negative equity is down by roughly a third from its 31.4 percent peak in the first quarter of 2012.

Negative equity has fallen for seven consecutive quarters as home values have risen, freeing almost 3.9 million homeowners nationwide in 2013 from being underwater. The national negative equity rate fell from 27.5 percent of all homeowners with a mortgage as of the end of the fourth quarter of 2012, and 21 percent in the third quarter.

However, more than 9.8 million homeowners with a mortgage still remain underwater. On average, a U.S. homeowner in negative equity owes $73,405 more than what the house is worth, or 39.7 percent more than the home’s value, according to Zillow. While roughly a fifth of homeowners with a mortgage are underwater, 92 percent of these homeowners are current on their mortgage payments.

Pending Home Sales Down Since Last Year 

The National Association of Realtors said on Friday that its Pending Home Sales index, which is a forward-looking indicator based on contracts signed but not closed, edged up to 95.0 in January from an upwardly revised 94.9 in December. But the index is well below January 2013, when it was 104.4. The December index reading was the lowest since November 2011, when it stood at 94.6.

NAR chief economist Lawrence Yun cited “ongoing disruptive weather patterns” as part of the reason buyers aren’t inking contracts quite as rapidly as last year. “Limited inventory also is playing a role, especially in the West, while credit remains tight and affordability isn’t as favorable as it was a year ago,” he noted in a statement.

Wall Street ended the day mixed on Friday, with the Dow Jones Industrial Average gaining 49.06 points, or 0.3 percent, and the S&P 500 up 0.28 percent. The Nasdaq lost 0.25 percent. Investors aren’t fond of uncertainty, however, and the events in the Ukraine drove U.S. shares down on Monday. On Monday in Japan, the Tokyo’s Nikkei 225 index was down 1.8 percent, and Dow Jones futures were falling.