Bad News, Good News from Eurozone; Prices on Foreclosed Homes Down
- Feb 19, 2013
Recent economic news from Europe has been in part discouraging, but (remarkably) there have been some relatively optimistic stories lately as well. First the bad news: Late last week, the European statistical agency Eurostat reported that eurozone GDP dropped 0.6 percent during the fourth quarter of 2012. In no quarter last year did the zone grow, the first time that’s ever happened since the euro was dreamed up.
The zone’s GDP decline was spurred by a surprise 0.6 percent contraction in the German economy during the fourth quarter of 2012, and a 0.3 percent drop in the French economy. Among other things, the Germans were beset by weak exports, as other nations’ weak economies didn’t buy as much from the Federal Republic as they once did.
And there’s more weakness ahead: a separate report by he Association of German Chambers of Commerce and Industry (DIHK) on Monday said that German companies expect to add a net of 150,000 jobs in 2013. That’s better than losing jobs, but even in 2012 German businesses added 422,000 jobs, down from 561,000 jobs in 2011.
On the other hand, in a blow for eurozone stability, Cypriot Conservative leader Nicos Anastasiades, won the first round of island’s presidential election, a fact that wouldn’t be economically important except that Cyprus asked for a bailout from the EU and IMF last year, the fifth country to do so. Anastasiades is in favor of finalizing the 17 billion euro ($22.7 billion) rescue package and keeping the country in the euro zone; now he faces a runoff.
Also, Spain’s banks, which have long been a poster child for the worst that can happen to eurozone banks short of outright collapse, saw their nonperforming loans drop by 24.1 billion euros to 167.4 billion euros in December, the Wall Street Journal reported on Monday. That means that 10.4 percent of total outstanding Spanish bank debt is nonperforming, down from a record high of 11.4 percent in November.
Prices on Foreclosed Homes Down
The latest FNC Foreclosure Market Report, which was released on Monday, says that foreclosure prices have bottomed out in recent months and the U.S. residential foreclosures have stabilized while underlying home values are rising. In fact, foreclosure prices are at a 10-year low.
Though residential foreclosures are still very high in many hard-hit markets, mortgage technology company FNC says that foreclosure price discounts, which compare a foreclosed home’s estimated market value to its final sales price, have contracted to pre-mortgage crisis levels, to come in at about 12.2 percent in the fourth quarter of 2012. At the height of the mortgage crisis in 2008 and 2009, foreclosed homes were typically sold at more than 25 percent below their estimated market value.
“The fact that we are seeing a combination of rising home prices and a bottoming out of foreclosure prices is a very good sign the housing recovery is taking hold,” FNC senior research economist Yanling Mayer noted in a statement. “This is the very first time in the long housing recession that the two are happening at the same time.”
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