Foreclosure Activity in Massachusetts – Foreclosures Rise But Are They Leveling Off?  

 

Welcome back to our continuing monthly examination of foreclosure data for Massachusetts.  As we have seen so far in 2016 all the metrics are up again this month.  We are now up to 28 straight months of increasing petitions on a year over year basis.  This is the 27th time the increase has been at least double digits.  Auctions and Foreclosure Deeds continue to consistently rise each month on an annual basis as has been the recent pattern.

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 will start off like we normally do by looking at the petitions.  As stated above they have now risen for 28 straight months on a year over year basis.  Taking a look at the numbers there were 1,002 petitions filed in June 2016 compared to 886 filed in June of 2015 for a modest increase of 13.09%.  However since they have increased for over 2 years now looking back to June of 2014 we see that there were 488 petitions filed, which gives an increase of 105% increase over those 2 years, and going back to June of 2013 petitions were at 245 for a 309% jump since that year!  Looking at the year so far there have been 6,616 petitions year to date which is up 24.45% over the 5,316 at this point in 2015.  Through the end of the first quarter this year petitions had risen on a quarterly basis for 9 straight quarters.  The moderation in the increases recently did in fact have Q2 of 2016 go down for the first time in 10 quarters compared to Q1.  Q2 had 3249 filings compared to 3367 in Q1 for a small 3.50% decrease, but it is the first quarterly decline since Q3 of 2013 and they may be leveling off some.  Note that this doesn’t mean I would expect the year over year increase to stop any time soon.  It just might be more seasonal rather than a steady march upwards, for example Q3 was higher than Q4 in 2011, 2012 and 2013 before this steady increase.  If things start to hold steady then we would be looking at late 2012 type levels until.  I also would not be surprised if this is just a blip either, but we will need to see how the rest of the year plays out.

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 June 2016 there were 887 auctions scheduled compared to 530 in June 2015 giving a 67.36% increase.  Year to date they have substantially increased with the 4,648 already scheduled being up 45.84% over the 3,187 auctions announced at this point in 2015.

Finally we will look at the Foreclosure Deeds.  You should expect the foreclosure deeds to track pretty well with the increases in petitions with a long lag because of the long timeframe to complete foreclosures in Massachusetts.  They have been consistently rising year over year for a long time.  This marks the 8th consecutive month that it has happened, as well as 15 of the previous 16.  Looking at the data for this month we see that there were 470 Deeds recorded in June 2016 compared to 406 in June of 2015 giving an increase of 15.76%.  Looking at the quarterly data deeds had risen for 4 quarters in a row, but like petitions they declined from last quarter.  In Q1 there were 1,487 and this quarter they fell to 1,385 for a 6.86% decrease.  Similar to the petitions the decrease was small it may show a leveling off.  However I’d guess it was just a blip since we still have all those increased petitions moving through the system.  I would expect the quarterly data for deeds to trend up for at least 1-2 years based on the previous petition, and to a lesser extent auction, data.  Year to date there have been 2,872 foreclosure deeds filed in 2016 compared to only 2,030 at this time in 2015, giving a 41.48% increase year to date. 

What Does This Mean For The Market? :

Everything was up again this month with petitions now at 28 months of increases in a row.  Even with the small quarterly decline even if things level off around this level then we are back to 2012 levels so it is hardly encouraging overall.  As mentioned in most 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 increases in deeds REO inventory could start to climb as more of these petitions get though the system.  Again even with the small quarterly decline in deeds we are at late 2012 levels.  Also as mentioned above it is less likely that these will plateau yet since there is a big backlog of increased petitions to work though and since the Massachusetts  foreclosure process can be very lengthy, we are only starting to really see the 28 months 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 houses 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.  Even with the quarterly decrease petitions and deeds are at levels that they have not been at for several years so an overall slowdown does not seem all that likely.

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:

June 2016 Data:  http://www.thewarrengroup.com/2016/08/foreclosures-in-massachusetts-reach-28-consecutive-months-of-percentage-increases/  

 

 

 

 

 

 

(Image Credit: Lower Quarters) 

 

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