Economy Watch: Foreclosures Continue to Drop
- May 31, 2013
CoreLogic reported on Thursday that there were about 52,000 completed residential foreclosures in the United States in April 2013, down from about 62,000 in April 2012, for a year-over-year decrease of 16 percent. On a month-over-month basis, completed foreclosures remained flat in April.
As of April 2013, according to the company, roughly 1.1 million U.S. homes were in some stage of foreclosure (the foreclosure inventory), compared to about 1.5 million in during the same month a year ago, for a drop of 24 percent. Compared with March 2013, the foreclosure inventory was down 2 percent. The current foreclosure inventory represented 2.8 percent of all homes with a mortgage, compared to 3.5 percent a year ago.
Completed foreclosures are an indication of the total number of homes actually lost to foreclosure. Before the housing market crash in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006 (a “normal” rate). Since the financial crisis began in September 2008, the monthly rate has been much higher, and all together since then there have been about 4.4 million completed foreclosures nationwide.
Household wealth hasn’t recovered yet
The news about foreclosures might be good, but it doesn’t mean that American households have recovered from the slings and arrows of the Great Recession. On Thursday, as part of the Federal Reserve Bank of St. Louis’ annual report, the bank said that in real terms, average household wealth is only about half way back to prerecession levels.
That conclusion is in contrast to recent headline numbers about household wealth, which found that at the end of 2012, aggregate household net worth was $66.1 trillion, nearly back to its pre-crisis peak of $67.4 trillion at the end of the third quarter of 2007. The report, which was written by economists Ray Boshara and William Emmons, points out that the headline numbers are misleading for a number of reasons.
One is inflation, which has been low but steady over the years since 2007, reducing purchasing power of the U.S. dollar by about 10 percent since then. Also, simple aggregate net worth doesn’t adjust for population growth, and the number of households increased by about 3.8 million between the third quarter of 2007 and the end of 2012, or about 3.4 percent.
Perhaps most importantly, of the total recovery of $14.7 trillion between the 1Q 2009 and the 4Q 2012, $9.1 trillion, or 62 percent, was due to higher stock-market wealth. Stock wealth is unevenly held, with the vast majority of stocks owned by a relatively small number of wealthy families. Most families have recovered much less than the average amount.
Unemployment claims edge up
According to the Bureau of Labor Statistics on Thursday, for the week ending May 25, initial unemployment claims were 354,000, an increase of 10,000 from the previous week’s revised figure of 344,000. The less flighty four-week moving average was 347,250, an increase of 6,750 from the previous week.
Wall Street had a modest up day on Thursday, with the Dow Jones Industrial Average gaining 21.73 points, or 0.14 percent. The S&P 500 was 0.37 percent and the Nasdaq advancing 0.69 percent.