Economy Watch: Negative Equity Dropping, But Still Persistent
- Sep 11, 2013
In yet another report pointing to dropping negative equity among U.S. residential mortgage holders, CoreLogic said on Tuesday that about 2.5 million more residential properties returned to a state of positive equity during the second quarter of 2013. The total number of mortgaged residential properties with equity currently stands at 41.5 million, while 7.1 million homes, or 14.5 percent of all residential properties with a mortgage, were still in negative equity as of the end of 2Q13. Three months earlier, 9.6 million homes, or 19.7 percent of all residential properties with a mortgage, were negative, which represents a remarkable rapid shift.
Still, of the 41.5 million residential properties with positive equity, 10.3 million have less than 20 percent equity, which CoreLogic calls “under-equitied.” Under-equitied mortgages accounted for 21.1 percent of all residential properties with a mortgage nationwide. Among that group, 1.7 million residential properties had less than 5 percent equity, or “near-negative equity.” Properties that are near negative equity are at risk should home prices fall, the company warns.
“Equity rebuilding continued in the second quarter of this year as the share of underwater mortgaged homes fell,” Mark Fleming, chief economist for CoreLogic, says. “In just the first half of 2013, almost 3.5 million homeowners have returned to positive equity, but the pace of improvement will likely slow as price appreciation moderates in the second half.”
Fewer job openings in July
The Bureau of Labor Statistics released JOLTS on Tuesday, as it always does following the monthly employment numbers on the first Friday of the month. JOLTS—the Job Openings and Labor Turnover Survey—found that the number of job openings dropped from 3.869 million in June to 3.689 million in July, the lowest level in about six months. Still, the number of job openings is up 5.4 percent year-over-year compared to July 2012.
The hires rate (3.2 percent) and separations rate (3.0 percent) were little changed July. The quits rate—a subset of separations—was 1.7 percent in July, up a little from 1.6 percent in June, and 1.6 percent a year earlier. Quits are generally voluntary separations initiated by the employee, so they can serve as a measure of workers’ willingness or ability to leave jobs, and therefore an indirect reflection on the health of the economy. People are more willing to leave their jobs (for whatever reason) when they believe the economy is healthy enough to generate jobs.
The number of quits rose in finance and insurance, professional and business services, and health care and social assistance. The rise in these three industries was partially offset by a decline in the number of quits in mining and logging and wholesale trade.
Small business plan to create jobs, but are still worried
Small-business optimism remained roughly flat in August, dropping 0.1 points from July for a final reading of 94.0, according to the National Federation of Independent Business on Tuesday. While the total reading showed essentially no change over the month, individual indicators were more jumpy. Job creation plans leapt to a level not seen since before the recession and sales expectations improved, but this optimism was tempered by significant drops in sales and profit trends.
The favorable employment plans also contrasted sharply with the increasingly negative expectations for improved general business conditions. The month’s performance proved poor, but expectations, pre-Syria, were looking up, the NFIB said.
Wall Street was a little less giddy on Tuesday than Monday, but still in fine fettle, with the Dow Jones Industrial Average gaining 127.94 points, or 0.85 percent. The S&P 500 was up 0.73 percent and the Nasdaq advanced 0.62 percent.