It has been a poor weak for economic data in the US: retail sales were disappointing, while jobless claims ticked up. Is it any wonder US consumers still aren’t feeling particularly confident?
In a word, no. And recent data from First American CoreLogic on the housing market and from IPD on US commercial property do little to suggest the US is at all close to righting its economic woes.
Earlier this month, Deutsche Bank declared the number of US mortgage holders facing negative equity would hit 48 per cent — or 25m households — within two years. On Tuesday, Zillow.com made a more conservative estimate that 30 per cent of homeloans would be underwater by mid-2010.
But what about current figures? According to data released by First American on Thursday, as of June 30 more than 15.2m US mortgages – or 32.2 percent of all mortgaged properties – were in a negative equity position.
This is actually a slight decrease from the 32.5 per cent reported at the end of March, which the data provider said “reflects the recent flattening of monthly home price changes.”
However, the most recent report also showed there were an additional 2.5m mortgaged properties that were approaching negative equity.
And according to First Logic, negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage nationwide.
Other stats from the report include (emphasis FT Alphaville’s):
* The aggregate property value for loans in a negative equity position was $3,400bn, which represents the total property value at risk of default. In California, the aggregate value of homes that are in negative equity was $969bn, followed by Florida ($432bn), New Jersey ($146bn), Illinois ($146bn) and Arizona ($140bn). Los Angeles had over $310bn in aggregate property value in a negative equity position, followed by New York ($183bn), Miami ($152bn), Washington, DC ($149bn) and Chicago ($134bn).
* three states account for roughly half of all mortgage borrowers in a negative equity position. Nevada (66 per cent) had the highest percentage with nearly two-thirds of mortgage borrowers in a negative equity position. In Arizona (51 per cent) and Florida (49 per cent), half of all mortgage borrowers were in a negative equity position. Michigan (48 per cent) and California (42 per cent) round out the top five states.
First American’s chief economist Mark Fleming is cautiously optimistic:
Given that negative equity did not increase this quarter and home prices declines are moderating or flattening, we may be at the peak of the negative equity cycle. However, until negative equity recedes and unemployment declines, mortgage risk will continue to be very elevated
Still, whether home price declines are actually flattening is open to debate, and foreclosure activity – an important indicator of housing market health – hit a fresh record in July.
RealtyTrac reported on Thursday that foreclosure filings rose 7 per cent from June and 32 per cent compared with the same period a year ago. One in every 355 US homes received a foreclosure notice in July, the online marketplace for foreclosure properties said.
And foreclosures hurt house prices too. According to the National Association of Realtors, the uptick in foreclosure sales led to record 15.6 per cent decline in median home values in the second quarter versus the year before.
Nor does the picture in the commercial property sector inspire confidence.
The Investment Property Databank said on Friday that US real estate values fell by 17 per cent over the first six months of 2009.
As IPD noted:
Compared to last year’s IPD US Annual Property Index, which revealed an annual capital return of -12.2%, the first six months of 2009 has seen the pace of capital depreciation already far outstrip 2008′s entire decline.
Green shoots? Not quite.
Related links:
US CMBS delinquencies could exceed 5% by year end – FT Alphaville
UK housing market, the untold story – FT Alphaville
Don’t forget the US homeowner – FT Alphaville