Foreclosure Activity in Massachusetts – New Year Same Story!

Deja Vu - Same Story with Massachusetts Foreclosures

Welcome back to our continuing monthly examination of foreclosure data for Massachusetts.  As we saw in last month’s report all of the metrics we track were up for 2015 over 2014, and generally by a lot.  Heading into 2016 petitions have now increased year over year for 23 straight, which is the big story as completed foreclosures will continue to increase for a long time as these keep working through the system.

A quick note on the future of these reports before digging into this month’s numbers.  Several months ago the original source of data I use for these reports stopped publishing the numbers.  They were still available in the same format on a sister site and I did not have any worries about continuing as I had been.  However this month they abruptly stopped publishing the data and I did not see another source for awhile (one reason this is coming out later in the month than normal).  A new 3rd party source was found and I will keep doing reports as long as I have the data, however for those that read these regularly I just want to warn that they COULD end without warning if I am not able to get the data needed at some point.

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).

Let’s start off by looking at the petitions.  As stated above they have now risen for 23 straight months on a year over year basis, with all the increases being at least double digits.  Taking a look at the numbers there were 924 petitions filed in January 2016 compared to only 618 filed in January of 2015 for another big jump of 49.51%.  Since they have increased for almost 2 years looking back to January of 2014 we see that there were 364 petitions filed then which gives an increase of 153.8% increase over those 2 years.  January of 2013 was the 2nd to last month prior to the current 23 month run of increases so that was about the same as we have this year at about 930.  If the trend continues for 2 more months we will start to see these big increases across the 3 previous years.  While anything is possible I have no reason to think that the trend will suddenly stop.

Next we will look at auctions.  Auctions are the most volatile and least useful stat overall, but still do give some useful information as to the progression of these petitions that are flooding the system.  In January 2016 there were 745 auctions scheduled in January 2016 compared to 575 in January 2015 giving a 29.56% increase.  I do not usually look back past the previous year with auctions as they are volatile and we do not have the same continuous trend we see with the petitions (at least not yet) but it is worth noting the large ~25% increase for the year in 2015 was driven mostly by the huge increases of close to 250% seen in January and February.  So seeing a 30% increase on top of that is worth noting.  For completion there were 165 in January 2014 so this month is 351.5% higher than 2 years ago.

Finally we will look at the Foreclosure Deeds.  Unlike the auctions the foreclosure deeds we would expect to track with the petitions a little better, but with a significant lag time.  In MA it can easily take 2 years or more to complete a foreclosure so many of these increases we have seen in petitions have not even started working their way through the pipeline yet.  Of course many foreclosures will be completed faster than that and we are seeing increases in deeds more regularly now.  We have seen year over year monthly increases for the 3rd month in a row and for the 10th time in 11 months.  There was also an annual year over year increase of ~21.5% for 2015 and as also noted last month on a quarterly basis they had been up for 3 in a row and 5 of the previous 6.  So it seems that they are starting to settle into a more long term pattern of increase.  Specifically for this month we see that there were 348 Deeds recorded in January 2016 compared to 257 in January of 2015 giving an increase of 35.41%.

What Does This Mean For The Market? :

Everything was up this month by pretty sizable amounts.  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 with the pattern of increases in deeds starting to emerge the REO inventory could start to climb since foreclosures in Massachusetts can easily be 1 to 2 years, and often more, we are still only starting to see some of this 23 months of climbing foreclosure petitions getting though the system.  With that being 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.  The question is less if there will be more foreclosed homes as much as it will be when will banks release them to the market.

REO inventory does seem to be up compared to 6-12 months ago, but still much lower than what we saw in say 2012.  As more of these petitions filed work their way through the system (remember a 1-1.5 year foreclosure in Massachusetts is fairly fast) I expect the number to keep increasing.  When inventory does come on it will weaken the areas around these houses as it will increase inventory overall and these places do tend to sell below non-distressed properties in the area.  Over the last couple of years banks have done more work to places to get a price more along full market value, but unless the places were already in very good shape the bank rehabs are usually unimpressive and do not garner 100% of what a nicely done house gets.  So as these places sell they will generally go for less than similar homes in the area and will pull the overall market in the area down, how much is the real question.

Conclusion:

Since petitions continue to climb each month year over year banks will be getting more inventory back in the coming months, and years.  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, if not much longer.  Since sustained increase in foreclosure activity is a leading indicator of a market correction we would recommend being skeptical of predictions of endless growth of real estate markets throughout Massachusetts in the foreseeable future. 

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.  With 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 Buyer Brokers Only, LLC:

January 2016 Data:  http://info.buyersbrokersonly.com/blog/massachusetts-foreclosure-petitions-increase-23rd-straight-month

 

 

 

 

 

 

(Image Credit: Déjà vu via Déjà vu from SARTRE)

 

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