Economy Watch: Foreclosures Drop Temporarily

First-quarter foreclosure filings dropped 16 percent from this time last year, but the good news may not last. State tax revenues grew by nearly 9 percent on average for the year. And while weekly jobless claims rose, things are much better than in 2011.

By Dees Stribling, Contributing Editor

Image courtesy Flickr user JefferyTurner

RealtyTrac reported on Thursday that U.S. foreclosure filings — which means default notices, scheduled auctions and actual bank repossessions — happened to approximately 572,900 properties during the quarter of 2012, down 2 percent from the previous quarter and down 16 percent from the first quarter of 2011. The first-quarter total from this year was in fact the lowest quarterly total since the last quarter of 2007, when the housing crisis was only gathering steam.

According to the company, the decrease was attributable to a drop in activity of 8 percent quarter-over-quarter in states that use non-judicial foreclosure processes. On the other hand, foreclosure activity increased in states that primarily use judicial foreclosures, up 8 percent quarter-over-quarter. Since more than half of total foreclosures are in non-judicial states, the national total declined.

But not for long. “The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated,” Brandon Moore, CEO of RealtyTrac, said in a statement. Then he continued with the floodwater metaphor: “There are hairline cracks in the dam … The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen — both in terms of new foreclosure activity and new short-sale activity.”

State Tax Revenues Grow

The Census Bureau said on Thursday that state tax revenues rose 8.9 percent in fiscal 2011, up $62.1 billion from 2010 to a total of $763.7 billion. The rise (mostly) means that’s there more taxable income among businesses and residents of the states, and that states might not have to layoff workers quite as fast as previously, which has been a major source of unemployment.

All of the major tax revenue sources for the states increased. Corporate taxes were up 9.4 percent year-over-year, while individual income tax revenues gained 9.8 percent. State sales tax collection increased 8.2 percent. These sources of revenue were critical because, according to the bureau, they amount to about 70 percent of all state tax revenues.

All 50 states saw some increase in tax revenue, but naturally some states did better than others. North Dakota, which is experiencing an energy boom (and low unemployment), saw an increase of 44 percent, the highest increase among the states. Tax revenues were up 22.4 percent in Alaska, which was the second-highest rise. Other states with dysfunctional budgets (California and Illinois, for example), also saw large increases in revenue, but because of tax hikes.

Initial Claims Spike, China Slows, Investors Shrug It Off

On the heels of a weak(ish) monthly employment report, the latest weekly unemployment report also went retrograde. For the week ending April 7, initial jobless claims were 380,000, an increase of 13,000 from the previous week’s revised figure of 367,000. The less excitable four-week moving average was 368,500, an increase of 4,250 from the previous week’s revised average of 364,250. But at least things are better than at this time last year, since there were more than 448,000 initial claims during the comparable week in 2011.

Further afield — but also affecting the U.S. economy — the Chinese government said on Friday (local time) that the country’s GDP grew at an annualized rate of 8.1 percent for the first quarter of 2012, which was a surprise on the downside, and the continuation of a downward trend (anything less than about 10 percent is considered sluggish for the go-go Chinese economy). During the fourth quarter of 2011, Chinese GDP grew at an annualized 8.9 percent.

Also, the World Bank cut its estimate of Chinese GDP growth for 2012 to 8.2 percent; only two months ago, the organization was predicting 8.4 percent growth for the Middle Kingdom this year. If the current forecast is accurate, it would be the slowest annual growth for China since 1999. Chinese consumer demand has weakened lately, and so has demand for Chinese exports in other parts of the world, especially the ailing euro zone.

Neither the initial claims nor Sino-sluggishness seemed to faze investors on Thursday. After a week or so in a funk, Wall Street bounced upward again with vigor. The Dow Jones Industrial Average gained a meaty 181.19 points, or 1.41 percent, while the S&P 500 was up 1.38 percent and the Nasdaq advanced 1.3 percent.