Economy Watch: Underwater Mortgages Reportedly Down
- Dec 14, 2010
December 14, 2010
By Dees Stribling, Contributing Editor
CoreLogic, a specialist in crunching real estate data, said that fewer U.S. homeowners are underwater than previously. That is, fewer owe more on their mortgages than their homes are worth, or have “negative equity,” as CoreLogic puts it.
As of the end of the third quarter of 2010, the company calculates that there 10.8 million U.S. mortgages underwater, down from 11.3 million at the beginning of the year. Would that those numbers meant rising home prices, but no. Most of the missing underwater mortgages were extinguished by foreclosure.
Underwater housing isn’t evenly spread across the country, of course. A whopping sixty-seven percent of all of Nevada’s mortgaged residential properties are underwater, for example, followed by Arizona (49 percent), Florida (46 percent), Michigan (38 percent) and California (32 percent).
CoreLogic pointed out that being saddled with negative equity tends to change homeowners’ behavior. “Homeowners in negative equity are not likely to behave similarly to homeowners with equity, because their financial interest (the equity) has disappeared and has only a small prospect of returning soon given price trends,” the company noted in a statement. “The lack of equity means upside down homeowners are not likely to maintain and improve their property and are more likely to behave like renters.”
The official rate of U.S. homeownership as of the third quarter is 66.9 percent, CoreLogic added, citing U.S. Census Bureau figures. But if underwater homeowners aren’t counted as homeowners, the rate drops to 56.6 percent.
WSJ Find Economists Optimistic About ’11
On Monday The Wall Street Journal published the results of a survey of 55 economists it conducted recently, and found that the dismal scientists aren’t that dismal in their outlook for 2011. For the entire year, the consensus is for 3 percent GDP growth. Only a few months ago, few were predicting that much, and some of the gloomiest of the gloomy were still talking in terms of double-dip: fully 22 percent of them expected a double dip back in September. Now only 15 percent believe that.
What’s driving their optimism? Busy factories, more exports, some hiring throughout the economy, maybe even QE2 and the prospect of settling the matter of federal tax rates for the next two years, anyway.
But there’s still going to be some dismal aspects to the economy. Whatever the growth rate next year, it won’t be enough to drag unemployment below 9 percent by the end of next year, the economists say. The housing market will also still remain a problem, especially in places hard hit by the popping of the housing bubble.
Bank of America to Unload Toxic Mortgages
According to the New York Post, citing unnamed sources, Bank of America is preparing to sell off $1 billion in mortgages that it has already written off. That is, dump some toxic assets, to use parlance often heard in the early days of the financial crisis, but not so much recently.
The sale will reportedly include the loans themselves and their mortgage-servicing rights, or to put it more succinctly, whatever the buyers can squeeze out of them. A billion in toxic assets represents a considerable sale, but not a large one in terms of the bank’s total mortgage and mortgage-serving holdings of about $2.1 trillion.
Wall Street was headed for an up day on Monday, but ended mixed at the last minute. The Dow Jones Industrial Average gained 18.24 points, or a scant 0.16 percent, and the Nasdaq lost 0.48 percent. The S&P 500 broke even.