Foreclosure Activity in Massachusetts – 20th Straight Month of Increasing Petitions   

  MA Foreclosure data by County - Massachusetts Real Estate

Welcome back to our continuing monthly examination of foreclosure data for Massachusetts.  Petitions turn the big 2-0 this month, as in the 20th straight month with increasing year over year petitions filed.  Overall the pattern has changed a little bit again.  As always since we have been doing these reports petitions are up but after a couple of months of all 3 items increasing deeds have fallen below the level they were for October of last year.  All metrics year to date are well over their 2014 levels.

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 scheduled and finally the foreclosure deeds, which is where the bank takes the property back at the auction (when nobody else is willing to buy it at the auction).

We just had a couple months where we saw all metrics increasing but this month we are back to things being a little more mixed with deeds below the level they were this month last year.  Also while petitions are still up they were up by a much smaller percentage, however before we conclude that things might be slowing down after about 5 months of auctions bouncing around at the same levels as last year this is the 2nd month in a row with a sizable increase over the same month in 2014.

We are going to reverse the normal order this month since the petition numbers are the ones that we will dig into and have the most commentary on.  Therefore this month first we will look at the Foreclosure Deeds.  Deeds were down in October, somewhat surprisingly with several consecutive months of increases.  In October 2015 there were 374 deeds recorded compared to 423 filed in October 2014, for a decrease of 11.6% over last year.  For the year to date, however deeds are still up 19.4% compared to 2014 through October. 

Next we will look at are the auction announcements.  Above we mentioned they had been fairly flat for 5 months with a small single digit increase in August after 4 months with very minor single digit declines.  Last month they were up 22.4% and are up this month they are up a substantial amount again.  In October of 2014 there were 638 auctions announced and this year 767 giving a 20.2% increase.  Year to date they are up a large amount from 2014 with a 28.6% increase over that time.    

Finally let’s talk about the petitions, which have now increased from the previous year for 20 consecutive months, and by at least double digits every one of them.  In October they were up a relatively modest 17.6% from last year with 1135 filed in October 2015 compared to 965 in October of 2014.  As we point out every month now, since these have been going up for well over a year these increases are on numbers that were already up, and increases from 2013 to 2014 were often quite substantial.  Last October there was a sizable increase of about 91.5% from October of 2013.  Looking back to September of 2013 there were 504 petitions filed giving an increase for the 2 years of 125%. 

Year to date through October petitions are up 50.9% over the same time period in 2014.  As we mentioned last month through September there were actually already been more petitions filed in 2015 than all of 2014.  So it is already just a question of how many more there will be for the year, but it looks like it will be a lot more since through the end of October of 2015 there were 9,633 filings compared to a total of 7,588 for all of 2014 so we are already almost 27% past all of last year with another 2 months to go.

Finally we want to discuss the state heat map at the top of the article.  It is not surprising to see that areas in Central and Western Massachusetts are fairing a bit worse than the big population centers in the east.  However if you are in Western Mass do not get to worried seeing those very big increases in the Berkshires, Franklin County and especially the huge jump in Hampshire county, do not panic quite yet.  Relatively speaking almost nobody lives in those areas and while there may be no economic boom there are not many busts either so they are relatively stable areas.  See this other chart below to get a feel for a magnitude of these numbers.

MA Foreclosure Data by County (Graph) - Massachusetts Real Estate

So as you can see the actual numbers represented in those 3 counties are tiny compared to most of the other ones.  If you look combined they do not even match Barnstable County which is the next smallest.  We do not have any more detail than this chart so eye balling it I would guess that Hampshire had something like 59 petitions through October last year and 122 through this October, which is a 94% increase.  However, since we are talking about nearly 10K petitions statewide so far this year that is less than 1.3% of the total.  These kinds of percentages can look silly with small data sets.  A better barometer of what is going on out there is looking at Hampden County with Springfield and several other good sized cities and towns and is on par with some of the eastern counties in population.  While it is outpacing the state average it is less than Worcester and not that far off from Plymouth, Bristol and Suffolk Counties either.  In reality the Western Mass population is so concentrated in that area if you just lumped all 4 of those counties together the entire thing would only be at most a couple percentage points more than the number for Hampden County.

Now all that being said it is clear that Western and Central MA are the areas that are getting hit the hardest and definitely pull up the state average somewhat.  Those 3 Eastern counties above are also a touch above average they are much closer to it and then all the other places range from a little to a lot under the state average.  Norfolk County is definitely the anomaly that I wish I could explain.  The Cape and Islands are lower, but as we all know that is it is its own little world and does not have to relate all that closely to the rest of the state.  Also Essex County is fairly close but is a little bit closer to the rest and it is geographically displaced enough from most of the rest of the state that it could start to tail off as you get away from the Middlesex County border and into it most northern points.  However Norfolk is right in the heart of the action.  It borders 5 other counties all of which have much higher rates, being above Norfolk by 9-18 percentage points.  Unfortunately I have no good explanation of why there would be such a big gap between all of its neighbors.  If anyone has an insight into why this may be I would love to hear about it in the comments below!

What Does This Mean For The Market? :

Even though they were down this month overall deeds are going up so banks will be getting more inventory.  As mentioned in several previous reports we do not expect to see any big surge in REOs only because the banks do not want to put a lot of downward pressure on the market by flooding it with their inventory.  However it has to make its way through the system as some point and if they do start to trickle out as the market is weakening (See out Market Trend Reports to see several instances where the real estate might not be as hot as you may have thought) it cannot be helped that it will continue to contribute to that trend.  Since foreclosures in Massachusetts can easily be 1 to 1.5 years on the fast end we are still only starting to see some of this 20 months of climbing foreclosure starts getting though the system.  Given that is the case there is little reason to not expect a continued increase in the number of completed foreclosures for at least the next 2 years.

Conclusion:

Since petitions continue to climb each month year over year banks will be getting more inventory back.  Since the foreclosure process will generally take well over a year here we should expect foreclosure deeds to stay high for at least the next 2 years or more.  Many pundits still insist that this increased activity is mostly clearing up long delayed action on delinquent homeowners that got in trouble during the financial crisis.  While that is surely true to some extent let’s get real about that!  In Massachusetts the Real Estate Bubble started popping over 10 years ago at this point and the infamous Ibanez court ruling that DID bring foreclosures to a screeching halt for a while is coming up on its 5th anniversary and it has been YEARS since the banks cleared up those issues and have been proceeding with business once again.  Again while I completely agree that there is probably some housekeeping going on to clear up that previous mess it seems a bit farfetched to assume that a majority of these tens of thousands of petitions are made up of people that have been sitting around not paying for almost a decade because the banks were too busy or too scared to start the process.  Sustained increase in foreclosure activity is a leading indicator of a market correction so be leery of predictions of unbounded growth of the real estate markets throughout Massachusetts in the coming year and beyond.

To reiterate the advice in our previous articles, if you are thinking about selling a house this year you should consider getting it to market ASAP before these other properties start coming to the market.  If a large number of bank owned places start to come onto the market prices could dip and the days on market could start to increase.  If this happens you may get hit with the tough situation of selling for less than expected while also taking much longer to sell than you had anticipated.  This several markets throughout the region already seeing slower growth, flat growth or even pricing drops this danger is only getting riskier.

 

Do you need to sell your Massachusetts (or New Hampshire ) house fast?  If you would like to sell your home fast and hassle free schedule a consultation with us today.

 

 

All data for this article from The Warren Group:

October 2015 Data:  http://www.thewarrengroup.com/2015/12/massachusetts-foreclosure-starts-rise-17-6-percent-in-october/

 

 

 

 

 

(Image Credit: foreclosures and Oct. foreclosure chart both via The Warren Group)

 

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