(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).
By Tim H. Davis
BOSTON, May 16, 2014 --- Overall foreclosure distress in Massachusetts declined 56.9 percent from April 2013 to April 2014, from 8.8 units per 1,000 housing units, to 3.8 units per 1,000 housing units. With a strong 64.4 percent decline in distress, Boston has outperformed the state as a whole.
Combined, the state’s 26 gateway communities have also outperformed the state, with a 57.5 percent decline in distress over the last year, though taken individually, there is a great deal of variation between the gateway communities (see next section). The remainder of the state’s suburban and rural areas are seeing a still strong, but smaller, decline of 55.3 percent. Given the relative improvement in Boston and the gateway communities, the percentage of distressed housing units in Massachusetts’ suburban and rural areas increased from 52.0 percent to 53.9 percent of the total.
Despite the good news of overall declines in distress, as with previous editions of the Monitor, distress remains relatively high in communities across central Massachusetts (largely in Worcester County), as well as in a number of southeastern Massachusetts communities.
Also, the Warren Group recently released data showing that petitions jumped 133 percent from March 2013 to March 2014 to the highest monthly number since Feb. 2013. Mortgage servicers are increasing their activity, and two servicers, Nationstar Mortgage and Green Tree Servicing, are leading the way, with CitiMortgage close behind. Nationstar and Green Tree are servicing loans originally made by a number of lenders, but mortgages originated by Countrywide (later part of Bank of America) figure prominently among their portfolios. These foreclosures are not on recent loans, however, as most represent the continued clean-up of the mid-2000s sub-prime mortgage bubble.
This increase in petitions should be monitored, particularly in gateway and central Massachusetts communities with weak real estate markets. First and foremost, it is in these communities, as well as certain Boston neighborhoods, where sub-prime loans were concentrated, and secondly, it is these weaker real estate markets that petitions are more likely to result in completed foreclosures.
Foreclosure Monitor defines properties in distress as those 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 distress declines in all 26 gateway communities
The Massachusetts Legislature established a definition, based on US Census Bureau data related to poverty, income, and educational attainment, to determine which Massachusetts municipalities constitute “Gateway Communities”. Initially, 24 communities qualified for gateway status. Using data released in 2013, Attleboro and Peabody were added to this list. For this reason, our analysis of the gateway communities now includes these two municipalities (see Table 1).
These communities represent just 26.7 percent of the state's housing units, but account for 40.0 percent of the state's foreclosure distress. In addition, the gateway communities have an overall distress rate that is 50 percent higher than the state's.
This edition of Foreclosure Monitor found that for the fourth quarter in a row, all 26 communities saw year-over-year declines in distress. The largest decline was in Everett (-75 percent), followed closely by Malden (-70 percent), and Lawrence (-66 percent). The smallest declines were in Chicopee (-40 percent) and Pittsfield (-41 percent). Five of these communities (Westfield, Peabody, Everett, Malden, and Quincy) have rates of distress that are lower than the state as a whole. On Jan.1, 2014, Barnstable’s distress rate was also lower than the state, but as of April 1, its rate is just slightly higher than the state (3.9 per 1,000 housing units, compared to 3.8 for the state).
A review of additional data related to unemployment, jobs, and sales prices provide little additional insight as to why some communities had larger declines in distress than others. For example, Everett had the largest declines in distress (-75 percent), and Chelsea had one of the lowest declines (-47 percent). These adjacent communities share much including relatively strong declines in unemployment and increases in sales prices.
For the first time since Oct. 2011, Brockton has been dislodged from its spot as the municipality with the highest rate of foreclosure distress. The Worcester County town of Winchendon carries this title for April 2014 (see Table 3). Brockton’s distress improved at a rate similar to the state as a whole (-57 percent), and had the second highest rate of distress in the state. In addition to Brockton, four other gateway communities (Springfield, Fitchburg, Taunton, and Chelsea) remain among the state’s 30 most distressed municipalities.
30 most distressed Gateway tracts limited to 9 cities
As 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 April 1, 2014 the 30 most distressed census tracts in the state's gateway cities were limited to just nine cities, up from six one year ago. Twenty-three of these tracts were among the state's 30 most distressed census tracts, down from 28 in April 2013 (see Table 2).
Among the facts this table shows are:
• Brockton had the highest number of census tracts (12), unchanged from last quarter or the year before. Springfield was close behind, with eight tracts, up from seven tracts one year ago.
• Distress declined in every tract, but improvement was weakest in Fall River’s 6416 (-15 percent).
• The biggest decline in distress was in Brockton's tract 5104 (-71 percent).
• Six communities had only one tract in the top 30 (Chelsea, Fall River, Lawrence, Lynn, New Bedford, and Worcester). Of these, Chelsea, Lawrence, and Fall River did not have any tracts in the top 30 one year ago.
• All of the census tracts in this table have distress rates that are at least twice that of the gateway communities as a whole.
Boston distress rate improving faster than state
The overall distress rate in Boston as of April 1, 2014 was 2.4 units per 1,000 housing units, below the statewide rate of 3.8 per 1,000 units. Compared to a year ago, Boston's distress rate has declined 64.4 percent, faster than the statewide decline of 56.9 percent.
Table 3 below provides detailed information on the 30 most distressed tracts in Boston. By neighborhood, the breakdown of these tracts was: 16 tracts in Dorchester, five tracts in Mattapan, four tracts in Hyde Park, three tracts in Roxbury, and two tracts in East Boston. Last quarter, there was one tract each in Jamaica Plain and West Roxbury. This quarter, the pattern is more typical of the long-term pattern, with the top 30 in only five neighborhoods.
Only three Boston tracts are in the statewide top 30 tracts. Indeed, the last tract on this list, Mattapan’s tract 1009, has a distress rate (4.0 per 1,000 units) that is only slightly higher than the statewide distress rate (3.8).
Distress in suburban and rural 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. Of Massachusetts’ suburban and rural municipalities, the 30 most distressed are presented in Table 4. Combined, these 30 communities contain 1,121 units in foreclosure distress, compared to the 1,217 in Boston and Springfield, combined. Of these top 30 most distressed, all but one had a decline in distress from April 2013 to April 2014. Princeton’s distress rate remained unchanged from one year ago. The decline in distress was smallest in Lancaster (-13 percent) and Sterling (-17 percent). The most distressed municipalities continue to be concentrated in Central and Southeastern Massachusetts.
Of these 30 municipalities, 21 are located in central Massachusetts’ Worcester County, or are immediately adjacent to Worcester County. As was discussed in last quarter’s Foreclosure Monitor, these central Massachusetts communities are on the lower tier of the two tiered housing recovery. While the Massachusetts sales prices recovery began in 2009, these communities have only seen recovery since 2011 or 2012, and single-family sales prices remain below their pre-recession peaks.
Other trends in real estate, foreclosures
The following links are provided for readers to directly access regular sources of foreclosure and real estate trends:
• Real estate sales volumes and prices: 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 7.8 percent decline in the number of single family sales from March 2013 to March 2013, and an 8.6 percent increase in median single family sales prices, while the Mass. Association of Realtors reported a greater, 11.5 percent decline in single family sales, but a similar 8.3 percent increase in median single-family sales prices. Both sources cite a lack of inventory for upward pressure on prices, but during March there was some improvement in the balance between sales volume and new listings.
S&P Case-Schiller Price Index recently released its Feb. 2014 data. Prices continue to rise, with a 12.9 percent increase from Feb. 2013 to Feb. 2014, for its 20-city composite. Prices increased in all 20 cities, and prices increased 8.5 percent in Greater Boston, placing Boston 17th of the 20 cities measured. The smallest price increases were in Cleveland (3.0 percent) and New York (6.1 percent). The biggest annual price increases were in Las Vegas (23.1 percent) and San Francisco (22.7 percent), continuing a pattern seen over much of 2013. For the 20-city composite, prices have not yet recovered to the pre-recession peak, but two of these cities, Dallas and Denver, have fully recovered, and prices in these two cities are now at record highs. Prices in the remaining 18 cities have not fully recovered, though Boston and Charlotte have recovered the most. For Boston, prices are only 5.4 percent below the pre-recession peak. At the other end of spectrum, Las Vegas’s prices remain 44.5 percent below the previous peak.
• Foreclosures: CoreLogic recently released March foreclosure statistics. At 1.2 percent of mortgaged properties, the foreclosure inventory (properties in the foreclosure process) in Massachusetts is lower than the nation as a whole (1.8 percent), or any other northeastern state, except New Hampshire (0.8 percent). The Warren Group also released its March data. Foreclosure petitions increased 133 percent from March 2013 to March 2014, from 283 petitions to 600 petitions. Foreclosure deeds declined 31 percent over the same period, from 229 to 194. The recent spike in petitions should result in some increase in foreclosure deeds in coming months, despite the overall improvement in the real estate market.
(Tim Davis is an independent research consultant commissioned by MHP to do foreclosure analysis and the Foreclosure Monitor).