By Tim H. Davis, July 29, 2010
The Massachusetts foreclosure picture is presenting a classic good news, bad news scenario, as the rate of foreclosures in some of the hardest-hit urban neighborhoods are slowing, while nearby neighborhoods are beginning to see a spike, according to Foreclosure Monitor's regular quarterly analysis of foreclosure data from The Warren Group.
In analyzing the number of units affected by foreclosure by zip code, Foreclosure Monitor found that for the first time, Lawrence's 01841 has been knocked from its perch as Massachusetts' most distressed zip code. A 19 percent decline in the number of distressed units from July 2009 has moved this zip code to third place, behind Templeton's 01468 and Springfield's 01108.
In addition to 01841, there were seven other zip codes in the top 20 that had a decline in the number of distressed units. Of these seven, three zip codes were in Boston (Dorchester and Mattapan), two were in Lynn, and there was one each in Brockton and Springfield.
While this is good news for these neighborhoods, adjoining zip codes have not fared as well, as there was an eight percent increase in Brockton's 02302, a nine percent increase in Dorchester's 02122 and a 27 percent increase in Springfield's 01151. This is a sign that while the hardest hit zip codes may have hit bottom, a second tierofzip codes in these same cities are now under stress.
Foreclosure Monitor's zip code analysis also found that the largest increases in the rate of distressed units from July 2009 to July 2010 was in Templeton's 01468 (67 percent), vaulting this Templeton zip code from 13th in July 2009 to the most distressed in July 2010. Other significant increases could be found in Wareham's 02538 (62 percent) and Sandwich's 02644 (38 percent).
Foreclosure Monitor's scope & sources
Foreclosure Monitor is able to provide this analysis through the CHAPA/Warren Group distressed property database, with support from the state Department of Housing and Community Development (DHCD).For other recent Foreclosure Monitor reports, click here.
Foreclosure Monitor's quarterly analysis includes properties where a foreclosure petition has been filed, an auction has been scheduled, or when a property has been foreclosed and taken back by the bank (these are known as "REO" or "real estate owned" properties).
Given the large number of multi-family properties in Massachusetts, Foreclosure Monitor's analysis tracks the number of units impacted by foreclosure rather than the number of properties affected by foreclosure. This report reflects snapshots of distress in municipalities, zip codes, and census tracts across Massachusetts at the beginning of July 2009 and July 2010. Other highlights from our quarterly analysis include:
Municipalities: Easing up in urban areas, rising in Worcester County
From July 1, 2009 to July 1, 2010, the number of distressed units in Massachusetts increased from 32,374 to 37,759, a 16.6 percent increase. For every 1,000 units in Massachusetts, 14.94 were distressed as of July 1, 2010.
The number of distressed units depends on both new foreclosure activity and the rate at which lenders sell properties to new homeowners. Brockton and Lawrence remain the cities with the highest rate of distressed units, despite a decrease in the number of distressed units. Conditions have improved faster in Lawrence than in Brockton. A year ago, Lawrence ranked first in distress, with Brockton second. These two switched positions last quarter.
Lynn has also seen a decline in the number of distressed units (-7 percent), but remains in third place. Fitchburg and Chelsea round out the top five. A year ago, Fitchburg was ranked eighth, but a 16 percent increase in distress moved this northern Worcester County city to fourth place.
Large increases were also found in the Worcester County towns of Brookfield (157 percent), Ashburnham (126 percent) and Templeton (76 percent). While a small number of properties can account for large changes in these smaller communities, the level of distress across Worcester County should be a cause for concern as nine communities are in the top 20. The next most troubled county is Plymouth with three communities (Brockton, Carver and Wareham).
Of those cities and towns that fell out of the top 20 from a year ago, the most notable are Everett, with a nine percent decline in distress, and Marlborough, with a seven percent decline. Dighton, Haverhill and Leicester also fell out of the top 20.
Census tracts: Pinpointing urban trouble spots; good news for Lawrence
While the number of housing units in a zip code can range from dozens to more than 20,000, the number of units in a census tract generally ranges from a 1,000 to 3,000, providing a smaller area for analysis of foreclosure distress. At the same time, due to the smaller number of housing units, a small increase in the number of distressed units can lead to a large increase in the rate of distress.
At the census tract level, Boston tracts in Dorchester and Roxbury occupy seven of the top 20 tracts (up from six the year before). Four Brockton tracts are in the top 20, up from three in July 2009. Lynn and Springfield both had three tracts in the top 20.
While the results were mixed in Brockton and Lynn (there were increases in some tracts and declines in others), all three Springfield census tracts in the top 20 experienced no change or an increase in the number of distressed units. The two Worcester tracts also saw increases in distressed units.
There is good news for Lawrence, where there is only one tract now in the top 20 (down from three in July 2009), and its rate of distress declined 21 percent from July 2009 to July 2010. Overall, eight of the top 20 census tracts had a decline in the number of distressed units from July 2009 to July 2010.
Changing foreclosure pattern: Continued shift from multis to single-family
From July 1, 2009 to July 1, 2010, there was a 28 percent increase in the number of bank-owned properties (from 4,211 to 5,395) that have been held for two years or less. During the same period, the number of properties in the foreclosure process (a petition has been filed or an auction scheduled) increased 20 percent (from 20,258 to 24,270). These increases are indicative of the continued difficulties facing Massachusetts families, despite the recent improvements in the overall economy.
The pattern of distress continues to shift from multi-family homes to single-family homes and condominiums, which made up 80 percent of all distressed properties in July, up from 76 percent the year before. During this same period, single-family homes and condominiums increased from 69 percent to 77 percent of bank-owned properties.
Bottom line: What does all this mean?
With the expiration of the homebuyer tax credit at the end of April and many of these transactions closing in June, it is difficult to make any predictions about short term trends in the real estate market. Indeed, we are still in a period of general economic uncertainty, a position confirmed by Federal Reserve Chairman Ben Bernanke in his recent testimony to Congress.
Given that current real estate sales data cannot provide a clear sense of an improvement in the market, we must rely on measures of the overall economy, especially job creation and the unemployment rate, to provide signals that the market is recovering sufficiently to reduce foreclosures. According to the Bureau of Labor Statistics, the Massachusetts unemployment rate peaked at 9.5 percent in January and February, and dropped to 9.0 percent in June. Even with this improvement, there are 29 other states with lower unemployment rates.
Within New England, Rhode Island is the only state with a higher unemployment rate (12 percent). In more promising news, Massachusetts gained 44,700 jobs from January to June 2010. This begins to make a dent in the 167,000 jobs lost in Massachusetts during the recession.
Links to foreclosure, real estate trends
The following links are provided for readers to directly access regular sources of foreclosure and real estate trends, some of which are mentioned in the proceeding analysis.
Foreclosure Data
The Warren Group released June 2010 foreclosure deed and petition data for Massachusetts, showing a 109 percent increase in the number of foreclosure deeds over June 2009, but a 22 percent decline in the number of foreclosure petitions filed during the same period. This is a sign that while lenders are completing foreclosures started a year ago, there is some improvement in the long term trend.
RealtyTrac released data on foreclosure activity (petitions, auctions and bank-purchased properties) for Q2 2010. RealtyTrac also reported an increase in foreclosure deeds but a drop in foreclosure filings, but at the national level. Nationally, foreclosure activity increased one percent from Q2 2009 to Q2 2010, but this was a decline of four percent from Q1 2010.
Real estate sales data
The Warren Group and the Massachusetts Association of Realtors (MAR) release sales figures for Massachusetts the last Tuesday of each month. At the end of July, the two firms reported that single-family sales volumes had increased 25 to 28 percent from June 2009 to June 2010, largely due to the homebuyer tax credit. In addition, MAR reported that the median single-family home price was up eight percent from June 2009. While this is good news, there are indications that the market continues to struggle, with MAR releasing pending sales data that suggests a dramatic slowdown in sales after the end of the homebuyer tax credit. While a moderate decline in the number of homes going under agreement is to be expected immediately after the end of the tax credit (May and June), July and August pending sales data will provide a better sense of the market strength.
The S&P/Case-Schiller Price Index released the May sales price index for Greater Boston and 19 other US metros. Boston continues to fare better than most other metros studied, with a five percent increase in home prices from May 2009 to May 2010. On the east coast, only Washington, DC had a higher percentage price increase (seven percent).