In northern Worcester County, Route 2 is the road to foreclosure.
Homebuyers lured by cheap prices took Route 2 into Fitchburg and Leominster at the height of the housing bubble a few years ago. Longtime residents displaced by those newcomers followed Route 2 west to buy homes in rural towns like Athol and Orange.
Now the towns along Route 2 and west of Interstate 495 are among those with the highest rates of foreclosures in Massachusetts, according to figures released by real estate data provider, Warren Group. Fitchburg, for example, had the eighth-highest concentration of foreclosures among Massachusetts communities in 2007 - 12 homes seized for foreclosure for every 1,000 housing units, 120 properties in all.
The northern Worcester County real estate market was never as strong as more easterly or central parts of the state. And now, the high number of foreclosed homes here is dragging down the local market even more so, as banks dump seized properties, which local housing specialists said is depressing prices.
At the same time, new buyers are finding it harder to qualify for loans, reducing the pool of potential buyers who could purchase homes from delinquent borrowers. While some have averted foreclosure by arranging a short sale - selling the property for less than what they owe the bank - others have been unable to devise an escape plan and have had no choice but to lose their homes.
"In the past six months, I'd say we're in a foreclosure crisis," said Laurel Miller, director of homeownership programs for the nonprofit Twin Cities Community Development Corporation in Fitchburg.
Lawrence and Brockton have higher rates of foreclosures. But people here said the real estate market's collapse in northern Worcester County has been especially devastating because of the area's relative economic isolation, compared to cities closer to Boston's transportation networks and urban core.
"Our incomes here are much lower than they are in the Boston area. People were stretching to buy homes," said Mark Dohan, director of the Twin Cities CDC.
With a low per capita income of around $23,400 compared to the statewide average of $30,700 many homeowners were in arrears as soon as they signed their mortgages. They never had the resources to keep up with their payments.
In 2006, for example, the Fitchburg-Leominster region had the seventh-highest number of subprime mortgages in the nation, 187, that went delinquent just three months after the borrowers closed on their loans, a Mortgage Bankers Association study released last year found.
"People bought their homes and immediately stopped paying for them," Dohan said.
In an ordinary market, those homeowners could sell their homes and pay off their debt. Now they don't have that option. Median sale prices for single-family houses in Fitchburg, for instance, fell almost 16 percent, to $178,000 in 2007 from $211,000 the previous year, according to Warren Group.
"You see rising foreclosures because of falling house prices," said Prabal Chakrabarti, director of community affairs for the Federal Reserve Bank of Boston. "People borrowing to the margin and people lending to the margin, that's the population that, when house prices go down, goes into foreclosure."
Many younger, more financially-minded newcomers who understand the real estate market are turning to short sales to keep the bank from seizing their homes, realtors said.
A few years ago, these buyers, often young families with one or two parents working in the Boston metro area, chose to buy big houses with spacious yards in places such as Gardner rather than purchase an apartment in a Lowell three-decker for the same price. Now, as the value of their property decreases, they're trying to escape with their credit as intact as possible. The tactic is new to the area's normally calm market, Paula Savard, a Lancaster-based realtor for Aberman Associates..
"The short sale is the one creation of the 30-somethings in this real estate market and it's never been here before," she said.
Many of the migrants from Boston's northern suburbs who moved to area are also realizing the 1 1/2-hour commute to Boston is more expensive than just a few years ago. "The values were less because people had further to drive to work," Savard said. "Now it's more so because of the price of gas."
Rick Healey of Foster-Healey Real Estate in Fitchburg said he closed around 15 short sales out of the approximately 55 sales he processed last year. In January, he expected to close four short sales. Often, if the mortgage holders approach the bank early and make a case for a short sale, the bank will listen, he said. Foreclosure, after all, involves legal fees and the costs of ownership.
"The banks don't want to foreclose," Healey said. "When they foreclose, they have so much they have to deal with. Look at this winter. They need to plow [the houses] out. They need to heat them. Every time they do that, they lose money."
In 2002, Christine Mackie, 48, bought a 150-year-old, two-story Cape with an attached barn for horses in Townsend on the New Hampshire border. Her mortgage was $178,000, but as the years passed, the house skyrocketed in value and she refinanced twice, to $268,000, to generate extra cash from her equity.
When Mackie, a veterinary technician, split up with her boyfriend in 2006, she realized she couldn't handle her $1,750 monthly payments alone. Her mortgage holder, Ameriquest, agreed to not bring a foreclosure and ruin her credit, if she could sell the house. In late September, she found a buyer who offered $245,000.
"I weighed it out and it came out as a smart way for me to go," said Mackie, who now lives in a rented duplex in Pepperell with her 16-year-old daughter, her younger of two.
When she owned the house, Mackie spent around $40,000 renovating it with her partner and setting up a paddock for the horse her older daughter kept in the barn. At first, when she listed it for sale for around $330,000, she couldn't find a buyer and assumed the bank would foreclose on her. Her realtor, she said, "had showings but nothing came through."
Eventually Mackie lowered her asking price, to compete on a glutted market. And when the time came to finalize the sale, the bank made sure she had been tough in negotiating the best possible price. "They wanted us to prove that we were trying really hard," said Mackie. "It was close to a year at this point."
Homeowners not saved from foreclosures are still dealing with the consequences. Many homes in northern Worcester County are being lost in old mill towns where housing built for factory workers a century ago attracted Latino and Asian immigrants in recent years.
Others are occurring in the towns along Route 2 where relatives of those inner-city families purchased freestanding houses with loans acquired at the height of the bubble. In Athol, 25 miles west of Fitchburg, 45 housing units were seized last year, or more than 12 per 1,000 properties, according to Warren Group. Orange in Franklin County has a rate of almost 13 homes foreclosed per 1,000. Those towns border the Quabbin Reservoir wilderness, yet have foreclosure rates comparable to Worcester and Lynn.
Miller, of the Twin Cities CDC, said the ripple effects of bad loans could be seen along the Route 2 corridor. She expected the trend to worsen.
"We had a lot of people from Fitchburg who couldn't afford to live in Fitchburg anymore," said Miller. "A lot of them moved to Athol. Athol has a very low-income population. As soon as things start to turn, the economy starts to change, there's a downward spiral. They're only one paycheck away from not being able to make that mortgage payment."
