Foreclosure Activity in Massachusetts Continues to Increase

Introduction:

Last month we took a look at data on recent Foreclosure Activity and saw that is was up significantly.  This month we wanted to follow up on that article to see what the December data said and to evaluate 2014 as a whole in regards to this.

Homer Simpson - Foreclosure Activity

Recent Massachusetts Foreclosure Activity:

As a recap there are three items that are tracked for foreclosures which are the petitions (which is the first step for a foreclosure), the actual auctions and finally the foreclosure deeds, which is where there bank takes the property back at the auction (when nobody else is willing to buy it there).

We saw in the November 2014 data that all 3 of these items were up a bit over what they were in November of 2013.  Petitions in particular were up a lot.  This continued in December where petitions were up 97% year over year, this would be the 10th straight month this has been the case, with the last 3 months seeing yearly increases of 91.5%, 150% and 97%.  So these are very large and consistent increases.

Looking at the other 2 factors the auctions increased 14.8% year over year and the foreclosure deeds increased 38.2%.  This marks the 5th straight month that deeds have risen year over year.  These items are not as dramatic as the petitions but these increases would track with the petitions from 6+ months ago so the big jump in deeds would be more likely to come in the spring and summer months.

Massachusetts Foreclosure Activity for 2014:

Now that we have all the 2014 data in let’s take a look as to how things fared overall compared to 2013.

Not shockingly with 10 straight months of annual increases, with recent months being about double the same month last year, petitions are up a lot from 2013.  In 2014 a total of 7,588 petitions were filed up a full 45.4% over the 5,220 in 2013.

Interestingly both auction and foreclosure deeds were down for the year.  Auctions were down 9.3% for the year.  Deeds were also down, but only a fairly unamazing 1.75%.  For all intents and purposes this is just noise.

Looking a little more at the deeds the pattern makes a lot of sense in that the market started to come back strong in 2013 and didn’t really start to slow down until well into the 2nd half of 2014.  So in the early months of 2013 the market was starting to heat up but those months in 2014 the market was still roaring, so deeds were down year over year.  In the 2nd half of the year in 2013 the hot market was in full stride but the next year things were starting to soften.  Note deeds increased year over year for the last 5 months of the year reflecting this.  In the end these pretty much canceled out keeping the annual numbers basically flat.

What Does This Mean For The Market?:

So what does all of this mean?  First it is important to understand the lag time in a foreclosure.  As we discussed last month once a petition is filed it will be several months before a property would actually go to auction and if the bank takes it back at auction it can sometimes take months to file the foreclosure deed.  Therefore seeing a large increase in the number of petitions is a leading indicator that in a few months there will be an increase in auctions and then shortly after an increase in foreclosure deeds.

The ramifications for the market are the same as we detailed last month.  A quick recap of what impacts a large increase in distressed properties can have include:

  • Increase overall inventory, hurting sellers on the supply and demand equation
  • Foreclosures tend to sell for a discount therefore bringing overall prices down
  • REO properties often are in poor condition and can bring down the appeal of neighboring properties
  • They are also vacant which makes them more likely to be targets for break ins, vandalism, squatters or even just kids partying

All of these are unappealing to communities they are in and are detrimental to homeowners that are looking to sell their properties.

Conclusion:

The pattern seen over the last several months has continued with all forms of foreclosure activity being up over where it was the same month last year.  The massive increase in petitions the last few months along with the overall sizable increase for the year over 2013 is a very strong indicator that we are going to see more distressed properties come to market in 2015.  While hard to conclude we will see 90%+ increases there, like we are seeing in petitions, it is hard to imagine that we will not continue to see increases in auctions and eventually foreclosure deeds.  With roughly double the number of petitions in the final quarter of 2014 compared to 2013 the math just shows it is nearly impossible to not predict some increase here.

To reiterate the advice in our previous article, if you are thinking about selling a house this year you might want to get it to market ASAP before these other properties start coming to the market.  If a large number of these start coming onto the market prices could dip and the days on market for places could increase.  Once this happens you may get hit with the double whammy of selling for less than expected while also taking much longer to sell than you had anticipated.

If you want to sell your house fast and easy schedule a consultation with us today.

 

 

All data for this article from Banker & Tradesman via The Warren Group: December Data

 

(Image Credit: Homer Simpson Bank Foreclosed House via Trashout PRO)

 

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