Economy Watch: More Homes Emerge from Negative Equity in 2Q

Nearly 950,000 U.S. homes returned to positive equity in the second quarter, but new orders for U.S. manufactured goods suffered a steep drop in August.

CoreLogic reported on Thursday that nearly 950,000 U.S. homes returned to positive equity in the second quarter of 2014, bringing the total number of mortgaged residential properties with equity in the U.S. to more than 44 million. Nationwide, borrower equity increased year-over-year by about $1 trillion last quarter, the company said.

About 5.3 million homes, or 10.7 percent of all residential properties with a mortgage, were still underwater as of the second quarter. But that compares favorably to 6.3 million homes, or 12.7 percent, in the first quarter. A year ago, the negative equity share was 14.9 percent, or 7.2 million homes, which represents a year-over-year decrease in the number of homes underwater by almost two million.

“The increase in borrower equity from a year earlier is evidence that things are moving solidly in the right direction,” Sam Khater, deputy chief economist for CoreLogic, noted in a statement. “Borrower equity is important because home equity constitutes borrowers’ largest investment segment and, as a result, is driving forward the rise in wealth for the typical homeowner.”

New Orders Drop, Unemployment Claims Rise

New orders for U.S. manufactured goods suffered a steep drop of $54.5 billion in August, or 18.2 percent compared with July, according to the Census Bureau on Thursday. The yo-yoing down came on the heels of a large increase in July, one that totaled 22.5 percent.

The culprit was clearly orders of transportation equipment, which tend to be volatile, especially big-ticket orders such as jet aircraft. Take transportation out of the equation, and durable goods orders (items expected to last three years or more) actually saw a small increase for the month: 0.7 percent. Orders for transportation dropped 42 percent, or $76.8 billion, for the month.

Separately, the U.S. Department of Labor reported on Thursday that for the week ending Sept. 20, initial unemployment claims were at an annualized rate of 293,000, an increase of 12,000 from the previous week. Though an uptick, that’s still a fairly slow pace. The four-week moving average was 298,500, a decrease of 1,250 from the previous week.

Wall Street experienced its largest sell-off in months on Thursday, with the Dow Jones Industrial Average off 264.26 points, or 1.54 percent. The S&P 500 lost 1.62 percent and the Nasdaq was down 1.94 percent. Apple led the way down at 3.8 percent off, but perhaps investors were just taking end-of-third-quarter profits, or were worried about weak indicators or geopolitical turmoil.