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We all want as much data as possible as soon as possible, even if it means relying on private research firms instead of government statisticians. So it is with measuring the number of homeowners who owe more on their mortgage than what their house is worth, otherwise known as being "underwater." It's an important metric for obvious reasons and yet it's not tracked by too many players. A Santa Ana firm, First American CoreLogic, has been generating these stats for some time - and it gets attention in news reports (including the lead story in today's WSJ), Congressional testimony and the like. It's data that can influence policy so you'd like to think that it's been accurate. But it hasn't. From the LAT:
In a news release, CoreLogic says it has tweaked its computers to take into account two things that the firm's data hadn't reflected: how much of a loan's principal has been paid down, and how much of a home equity line of credit is actually being used. The conclusion: 23% of all residential properties with mortgages were underwater in the third quarter. That's far below the 33.8% that would have appeared to be upside down on their loans using the old formula, the data firm says. California's numbers tumbled too, although it still has far more underwater borrowers than most states.
To be fair, economic data gets adjusted all the time. Just this morning, third-quarter GDP growth was revised downward to an annual rate of 2.8 percent instead of the initial estimate of 3.5 percent. That's a big difference, especially nowadays when everybody is looking for signs of recovery. The difference is that government always revises gross domestic product because when dealing with the massive U.S. economy, some numbers take longer to filter in. That's not the same as having faulty methodology.
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.