Foreclosure Activity in Massachusetts – Completed Foreclosures Spike

 Foreclosures Ahead! - MA Foreclosures on the Rise - Massachusetts Real Estate

Welcome back to our continuing monthly examination of foreclosure data for Massachusetts.  As we have seen the 1st couple of months of 2016 all the metrics are up again this month.  In February petitions crossed the 2 year mark for year over year increases so now we are up to 25 straight months of increases.  The percent increase in those were actually the lowest of the run but now the ones for the later points of the process are increasing a lot more.

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 25 straight months on a year over year basis, with all the increases being at least double digits until this month.  Taking a look at the numbers there were 1,179 petitions filed in March 2016 compared to 1108 filed in March of 2015 for a fairly small increase of 6.41%.  This is the first single digit increase in the 25 month run.  However since they have increased for over 2 years now looking back to March of 2014 we see that there were 660 petitions filed, which gives an increase of 78.64% increase over those 2 years, and going back to March of 2013 petitions were at 283 for a 317% jump over that year.  The pundits in the article stated that the small increase over last March is a sign that things are leveling off.  However as I pointed out in last month’s report  last March was a bit of a spike in petitions being the highest monthly total since 2012 and then taking 6 months for another month to exceed it, and I said that if any month MIGHT end the run this would be it.  I also said I did not think that would happen and it did not, but that helps explain the smaller increase relative to previous 24 months.

In addition to ignoring this fact about the March 2015 petition spike there are a few other reasons to not embrace the leveling off theory presented.  First with 3,367 petitions year to date they are up 29.8% over the 2,594 at this point in 2015.  In addition to that March completes the 1st quarter of 2016 and we now see that they have increased for 9 consecutive quarters (and 10 of the last 11).  So in summary despite a big spike this month of last year they are still up year over year, and despite this small increase they are still 30% ahead of last year’s pace while also steadily increasing for about two and a half years.  This does not seem to really support a statement that things are leveling off at this point.  If this continues for a couple more months than it would be a fair statement, however based on the recent and historical patterns (and no obvious reason why the trends would stop in April) I would predict that they will be up again next month and back into at least low double digits.

Next we will look at auctions.  Auctions are the most volatile stat overall, but so far this year has been consistently increasing with everything else.  In March 2016 there were 745 auctions scheduled compared to 478 in March 2015 giving a 55.86% increase.  Year to date they have increased almost the same as petitions with the 2,134 being up 29.73% over the 1,645 auctions announced at this point in 2015.

Finally we will look at the Foreclosure Deeds.  While you would expect the foreclosure deeds to track pretty well with the increases in petitions there will be a long lag because of the long timeframe to complete foreclosures in Massachusetts.  Back last year you were not always seeing increases in the deeds but in recent months they have been consistently rising year over year 5 months in a row as well as 12 of the previous 13 and have now gone up the last 4 quarters and 5 of the last 6, while this month’s total is also higher than any month since mid 2012.  Looking at the data for this month we see that there were 620 Deeds recorded in March 2016 compared to 359 in March of 2015 giving an increase of 72.7%.  Year to date there have been 1,487 petitions filed in 2016 compared to only 927 at this time in 2015, giving a 60.41% increase year to date.  Maybe saying that deeds “spiked” is a little misleading since despite being the highest monthly total in almost 4 years it wasn’t a huge jump, it is actually more likely a sign that the recent steady increase in completed foreclosures is starting to ramp up to follow the pattern seen in the petitions back about 18 months ago.

What Does This Mean For The Market? :

Everything was up again this month with petitions being lower than we have seen in awhile but auctions and foreclosure deeds up 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 getting bigger and consistent every month REO inventory could start to climb as more of these petitions get though the system.  Since the Massachusetts  foreclosure process can be very lengthy, we are just starting to really see some of this 2+ years of increasing petitions working their way 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. 

Conclusion:

Since petitions continue to climb each month year over year banks will continue to get 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.  So far this year, and especially this month, we are starting to see this prediction of steadily rising completed foreclosures coming to fruition. 

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.  If you read are frequent Market Trend Reports you will already know that there is no shortage of examples of weakening markets throughout eastern MA.

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 The Warren Group:

March 2016 Data:  http://www.thewarrengroup.com/2016/05/foreclosure-starts-rise-a-modest-6-percent-in-march/  

 

 

 

 

 

 

(Image Credit: Foreclosures Ahead via Credit Union Times)

 

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