Economy Watch: Fewer Homes Underwater in Q1; SoCal Housing Sales, U.S. Oil Production Spike
- Jun 13, 2013
CoreLogic reported on Wednesday that about 850,000 U.S. residential properties were no longer underwater as of the end of the first quarter of 2013 or, as the company put it, “returned to a state of positive equity.” All together, the owners of roughly 39 million mortgaged residential properties have at least some equity in their properties.
That leaves about 9.7 million properties as of the first quarter of 2012 that do not have any equity, or 19.8 percent of all properties with a mortgage. That’s still a high percentage, but at least it’s down from the fourth quarter of 2012, when 10.5 million property holders were underwater, representing 21.7 percent of the total, according to CoreLogic.
In other words, the underwater mortgage problem is still bad, but not quite as bad as it has been, mainly because of the recovery of many housing markets. Nevada still has the highest percentage of mortgaged properties in negative equity at 45.4 percent, followed by Florida (38.1 percent), Michigan (32 percent), Arizona (31.3 percent) and Georgia (30.5 percent). These top five states account for nearly a third of all negative equity nationwide, the company calculates.
“The impressive home price gains of 2012 and the beginning of 2013 have had a big impact on the distribution of residential home equity,” Mark Fleming, chief economist for CoreLogic, said in a statement. “During the past year, 1.7 million borrowers have regained positive equity. We expect the pent-up supply that falling negative equity releases will moderate price gains in many of the fast-appreciating markets this spring.”
SoCal Housing Sales Up
DataQuick, a real estate data specialist in southern California, reported on Wednesday that the sales velocity of residential properties in that part of the state — Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties – was at its highest level in seven years. Also, median sales prices were at a five-year high. The SoCal residential market is an important bellwether for the national market because of its size, but also because it took such a pummeling during the housing crash.
A total of more than 23,000 new and resale properties traded hands in the six counties in May, up 7.6 percent compared with April, and 3.8 percent compared with May 2012. The most recent total is the highest May total since May 2006, when more than 30,000 units were sold, but it’s still well below the long-term average sales each May since 1988, which is more than 25,600.
A good many of the recent sales seem to be investors – or speculators – so it’s hard to say exactly what the run up in sales portents. “We’re deep into uncharted territory: Amazingly low mortgage rates, a razor-thin inventory of homes for sale, and the release of years’ worth of pent-up demand,” John Walsh, DataQuick president, said in a statement. “Plus there’s a seemingly endless stream of investors and non-investors … How this all plays out is educated guesswork at this point. Understandably, speculation continues over whether another housing bubble is forming.”
Buyers paying with cash accounted for 31.9 percent of May’s home sales, compared with 34.4 percent the month before and 32.1 percent a year earlier. The peak was 36.9 percent this February, and since 1988 the monthly average is 16.1 percent.
U.S. Oil Production Spikes
In a report released on Wednesday, oil giant BP said that the United States experienced the largest single-year increase in oil production in history, up about 14 percent for the year to 8.9 million barrels per day. Production was up mainly due to fracking, which is a technique for recovering shade oil and gas that was previously uneconomical to produce. The U.S. center of this new surge in production is the Dakotas, which accounts for low unemployment rates in that part of the country (and in parts Canada, where shale production is up, too).
The report – the BP Statistical Review of World Energy – also details other changes in production and consumption of energy worldwide that both reflect changing economies, and affect national and regional economic growth patterns. For example, global energy consumption was up 1.8 percent in 2012, a smaller increase than in recent years. China and India put together accounted for roughly nine-tenths of that growth, but those economies aren’t growing quite as fast as before, and so didn’t contribute quite as much to overall energy usage as before.
Wall Street swung down again on Wednesday, with the Dow Jones Industrial Average dropping 126.79 points, or 0.84 percent. The S&P 500 lost 0.84 percent and the Nasdaq declined by 1.06 percent.