Headlines – Week of June 17, 2012
June 26, 2012
Standard & Poor’s reported that The Case Shiller Home Price Indexes rose for the first time in eight months in April. The 10- and 20-city indexes each rose 1.3 percent to the highest levels this year. Year-over-year, the 10-city index was down 2.2 percent and the 20-city index off 1.9 percent – both improving from March.
Economists had expected the 20-city index to show a 2.3 percent year-over-year decline in April.
Shadow Inventory Fell in April 2012 to October 2008 Levels
According to a recent report by CoreLogic, current residential shadow inventory as of April 2012 fell to 1.5 million units, representing a supply of only four months. This was a 14.8 percent drop from April 2011, when shadow inventory stood at 1.8 million units, or a six-month’ supply, which is approximately the same level as the U.S. was experiencing in October 2008. Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been approximately offset by the equal volume of distressed (short and real estate owned) sales.
Highlights of the CoreLogic report:
- As of April 2012, shadow inventory fell to 1.5 million units or four-month supply and represented just over half of the 2.8 million properties currently seriously delinquent, in foreclosure or REO.
- The four-month supply of shadow inventory is at its lowest level in nearly three years. It parallels the unsold month supply of non-distressed active listings that hit a more than five-year low in April, falling to 6.5-months from a 9.1-months supply just a year ago.
- Of the 1.5 million properties currently in the shadow inventory, 720,000 units are seriously delinquent (two month supply), 410,000 are in some stage of foreclosure (1.1-month supply) and 390,000 are already in REO (1.1-month supply).
- The dollar volume of shadow inventory was $246 billion as of April 2012, down from $270 billion a year ago and a three-year low.
- Serious delinquencies, which are the main driver of the shadow inventory, declined the most in Arizona (-37.0 percent), California (-28.0 percent), Nevada (-27.4 percent), Michigan (-23.7 percent) and Minnesota (-18.1 percent).
U.S. States Forecast Highest Tax Revenue in 5 Years
According to a recent government survey, U.S. states expect to collect higher tax revenues in the coming budget year that combined would top pre-recession levels. The increase could reduce pressure on states to cut budgets and lay off workers.
A slowly healing job market and modest growth have boosted sales and income taxes, which provide nearly three-quarters of state revenue. Overall corporate income taxes are also growing.
However, many states such as California continue to struggle with budget shortfalls.
According to a twice-yearly survey by the National Governors Association and the National Association of State Budget Officers, total tax revenue is forecast to rise 4.1 percent to $690.3 billion in the 2013 budget year, It’s the third straight year of revenue growth and $10 billion more than the budget year that ended June 2008. The recession began in December 2007.
Arizona, Ohio and Michigan are anticipating some of the biggest increase in tax revenue next year.
Michigan has already benefited from higher revenues. Last year the state had its first surplus in a decade.
In Ohio, tax revenue is projected to rise to $17.6 billion next year. That’s an 8.6 percent increase from the current budget year.
Others states are seeing less improvement. Iowa, Illinois and Arkansas are among those forecasting small increases.
And even though California is forecasting much higher revenue, much of that is coming from a tax increase. The state is struggling to close a $16 billion budget deficit and is considering cutting programs.
So are many other states. Aid from the federal government is dropping and the demand for health care, education and other services is rising.
About a quarter of the expected gain in revenue comes from proposed tax hikes in 10 states. Fifteen states recommended tax cuts, though not enough to offset the proposed gains.
The gains in revenue are also uneven. Tax receipts in 23 states are projected to remain lower than they were five years ago. The forecasts are based on proposed budgets submitted by governors.
Layoffs are slowing at the state level. State governments added an average of 3,000 jobs per month in the past six months, after cutting an average of 5,200 in the preceding six months. Still, the cuts aren’t entirely over: states cut 5,000 jobs in May.
The biggest layoffs have been at the local level, particularly in public schools. Local governments rely on property taxes, which are still declining as property values fall in the wake of the housing bust.
Since August 2008, when state and local government employment peaked, local governments have cut 528,000 jobs. State governments have shed 134,000.
Posted by Scott R. Lodde