(Foreclosure Monitor is an effort by MHP to help public officials determine how best to use their resources to help homeowners and neighborhoods hard-hit by foreclosure).
BOSTON, Nov. 26, 2013 --- While an improving real estate market has fueled recent declines in foreclosures, the filing of foreclosure petitions has edged upwards in the past few months. While not nearly as numerous as a year ago, the uptick is nevertheless a sure sign that lenders are adjusting to new foreclosure regulations enacted late in 2012, according to the latest analysis by Foreclosure Monitor.
Overall foreclosure distress in Massachusetts declined 44.5 percent from Oct. 2012 to Oct. 2013, from 9.8 units per 1,000 housing units, to 5.4 units per 1,000 housing units. Boston has seen a 52 percent decline while the state’s gateway cities are down 44 percent. The rest of the state –suburbs, rural towns and wealthier cities such as Cambridge and Newton – are down 43 percent. Fifty-four percent of all distressed properties in the state are located outside Boston.
Digging a bit deeper, Foreclosure Monitor found that Lawrence and four other gateway cities that saw significant improvement were all cities where price recovery began in 2009. Scroll down for more details.
While the year-over-year statewide decline is impressive, Warren Group data shows that foreclosure petitions have increased 78 percent over the summer, from 245 for the month of June to 436 in August to 438 in September. The data indicates that large lenders such as Wells Fargo, US Bank, and JP Morgan Chase, have all increased their foreclosure activity. The only notable exception is Bank of America, which has not increased its foreclosure petitions.
While Foreclosure Monitor does not expect the number of petitions to return to the levels seen during most of 2012 (an average of 1,400 petitions filed each month), the recent increase signals that foreclosures will continue to remain a concern, especially in the state’s most distressed, urban neighborhoods.
Foreclosure Monitor has reported previously that while much of the improvement is due to an improving real estate market, the slowdown in foreclosures was also due to banks recalibrating their foreclosure procedures after Massachusetts passed a law in 2012 requiring lenders to notify eligible borrowers of their rights to pursue a modified mortgage loan.
Since 2009, Foreclosure Monitor has provided quarterly analysis of foreclosure data from the Warren Group and other sources to pinpoint where foreclosure activity is happening so that policy makers can target public and private resources most effectively. Foreclosure Monitor defines distress as one- to three-unit properties where a foreclosure petition has been filed or an auction scheduled in the previous year, or the property has been bank owned (REO), for up to two years. Foreclosure Monitor focuses its analysis on Boston and the state’s gateway cities, while also providing basic information about the remainder of the state’s suburban and rural communities. Here’s the latest report:
Foreclosure distress declines in all 24 gateway communities
Foreclosure Monitor’s quarterly analysis of gateway cities shows that for the second quarter in a row, all 24 communities have had a year-over-year decline in distress. The largest declines were in Barnstable, Everett, and Revere (-59 percent), and the smallest decline was in Fitchburg (-25 percent).
Despite the good news, it should be pointed out that while these communities represent just 25 percent of the state's housing units, they account for 40 percent of the state's foreclosure distress. In addition, the gateway communities have an overall distress rate that is 56 percent higher than the state's.
Market turn-around helps to relieve distress in Lawrence
For this report, Foreclosure Monitor dove deeper into the gateway cities’ dropping distress rates to try and make a correlation between when prices began to stabilize and when distress rates began to improve. Foreclosure Monitor found that the five gateway communities with the largest declines – Lawrence, Malden, Chelsea, Revere, and Everett – all had real estate markets that began its recovery in 2009, as determined by yearly median sales price data provided by the Warren Group.
In 23 of the 24 gateway cities, drops in distress ranged from 41 to 80 percent. The exception is Pittsfield, which has had only a 17 percent drop in distress. Lawrence had the largest decline, of 80 percent. This is good news for Lawrence, which ranked among the most distressed communities when the Foreclosure Monitor was first launched in 2009, and is no longer among the state’s top 30 most distressed communities. The other four communities are more closely linked to the Boston real estate market, which has seen a strong revival in home prices.
In the remaining gateway communities, sales prices began to recover more recently, in 2011 to 2012. If the recovery in these housing markets can be sustained, the level of foreclosure distress should continue to decline.
It is important to note, however, that prices in all 24 gateway communities have not returned to their pre-recession peaks, so homeowners remain who are “underwater” (the home value is less than the outstanding mortgage), and at risk of default.
30 most distressed Gateway tracts confined to 9 cities
Since the number of housing units in each gateway city can vary dramatically, it's useful to analyze distress by census tracts, which generally range from 1,000 to 3,000 units. This helps provide state and local leaders with a better idea of exactly where property distress and neighborhood destabilization may be occurring and where public resources may have the most impact.
According to our analysis, as of Oct. 1, 2013 the 30 most distressed census tracts in the state's gateway cities were spread across nine cities, up from six cities one year ago.
Among the facts Table 3 shows are:
• Brockton had the highest number of census tracts (12), unchanged from the year before. Springfield was close behind, with eight tracts.
• Distress increased in only one tract: Leominster’s 7091, where distress increased 13 percent since a year ago. A year ago, no Leominster tracts appeared in the top 30 list. The same was true for Fitchburg and Pittsfield.
• The biggest decline in distress was in Springfield's tract 8005 (-53.3 percent).
Boston distress rate improving faster than state
The overall distress rate in Boston as of Oct. 1, 2013 was 3.6 units per 1,000 housing units, below the statewide rate of 5.4 per 1,000 units. Compared to a year ago, Boston's distress rate has declined 52 percent, faster than the statewide decline of 44.5 percent.
While some of this decline could be related to the recent slow-down by lenders in starting new foreclosures, the strong, recent performance of the Boston sales market also contributes to the decline. Median home sales prices are at record highs in central Boston neighborhoods, as well as in Brighton, Charlestown, South Boston, and Jamaica Plain. Despite the strength of the overall Boston market, there are neighborhoods still feeling the hangover from the recent housing bust, and prices have not yet fully recovered in neighborhoods with high rates of foreclosure distress, such as Dorchester, East Boston, Hyde Park, Mattapan, and Roxbury. In addition, Boston continues to have the largest number of units in foreclosure distress (989) than any other Massachusetts city.
Table 4 below provides detailed information on the 30 most distressed tracts in Boston. By neighborhood, the breakdown of these tracts was: 15 tracts in Dorchester, five tracts in Hyde Park, four tracts each in Mattapan and Roxbury, and one tract each in East Boston and Roslindale.
Distress in suburban/rural/higher-income urban communities
While the Foreclosure Monitor focuses on Massachusetts' most distressed urban neighborhoods, it is also important to note areas of distress elsewhere in the state, both in less urban areas (municipalities with a population of less than 35,000), and among Massachusetts' larger urban municipalities with higher median household incomes such as Arlington, Newton, Weymouth, Cambridge and Somerville.
Of these suburban/rural/higher-income urban municipalities, the 30 most distressed are presented in Table 5. Of these top 30 most distressed, one had an increase in distress (the small town of Hinsdale), one saw no change (Warren), and the remaining 28 all had a decline in distress from Oct. 1, 2012 to Oct. 1, 2013. The most distressed municipalities continue to be concentrated in Central and Southeastern Massachusetts.
Other trends in real estate, foreclosures
The following links are provided for readers to directly access regular sources of foreclosure and real estate trends:
• Foreclosure data: The Warren Group most recently released foreclosure data for the month of Sep. 2013. The number of foreclosure deeds filed in Sep. 2013 (247) was 52 percent lower than the 512 filed in Sep. 2012. This year-over-year decline was the 16th straight month of year-over-year declines, but it was a nine percent increase over the recent trough of 227 deeds in March 2013. Foreclosure petitions (the first step in the legal process to complete a foreclosure) also declined from Sep. 2012 to Sep. 2013 (-69 percent), but as stated previously, this year-over-year decline does not tell the full story: petitions increased 79 percent from June to Sep. Nationally, foreclosure activity (as reported by RealtyTrac) declined 27 percent from Sept. 2012 to Sept. 2013, though there was a small, two percent increase from the previous month.
• Real estate sales data: The Warren Group and the Massachusetts Association of Realtors (MAR) recently released their monthly real estate sales figures. The two use somewhat different data sets for analysis. The Warren Group reported a 18.6 percent increase in the number of single family sales from Oct. 2012 to Oct. 2013, and a 10 percent increase in median single family sales prices, while the Mass. Association of Realtors reported a 12.2 percent increase in single family sales and a 12.3 percent increase in median single family sales prices. MAR also reported that the inventory of homes for sale was tight, with 4.8 months of supply available on the market. With prices on the increase, the percentage of Massachusetts homeowners with "underwater" mortgages (negative equity) continues to decline. As of Sept. 2013, CoreLogic reports that 5.6 percent of Massachusetts homeowners have negative equity in their homes, compared to 15.8 percent in Sept. 2012.
• Home prices: The S&P Case-Schiller Price Index recently released its Sept. 2013 data. Prices are rising substantially, with a 13.3 percent increase from Sept. 2012 to Sept. 2013, for its 20-city composite. Prices increased in all 20 cities, and prices increased 7.5 percent in Greater Boston, placing Boston 17thof the 20 cities measured. New York (4.3 percent), Cleveland (5.0 percent), and Washington (7.0 percent) had smaller price increases. The biggest annual price increases were in Las Vegas (29.1 percent) and San Francisco (25.7 percent). Even with these recent increases, prices in these two cities remain below the previous price peak set in early 2006. Las Vegas prices remain 47 percent below the previous peak, and San Francisco prices remain 20 percent below the previous peak. Boston prices remain 8.5 percent below the 2005 peak.
(Tim Davis is an independent research consultant commissioned by MHP to do foreclosure analysis and the Foreclosure Monitor).