Mass. foreclosures spike in March

Yep, this is why Marcus and I keep posting the posts we do. This will continue to drive down prices.

And a look at the Credit Suisse graph of mortgage resets shows that we are due for substantially more foreclosures. An enormous amount of teaser loans were written in the last 3 years. These loans basically require refinancing when they reset - most people can't afford a$1,000 hike in monthly payments.

But you can't refinance when you are underwater, which is where you are with a 100% loan, or even a 95% loan, or these days even a 90%.

So the house goes into foreclosure. Throw in higher gas and food prices and it really gets ugly.

And yes, it will eventually seep into the top end of the market. Just as a rising tide lifts all boats, a sinking tide lowers them. Though the percentage drop should be lower with a flight to quality.

I think it would be helpful to know the total number of Mass. mortages that are being paid on time in order to give this story some context!

Andy B,

Thanks for the comment. The Mortgage Bankers Association releases a quarterly report on delinquencies and foreclosures. The most recent report charts the market as of December 31, 2007. It shows that 7.46 percent of all Massachusetts mortgage loans were delinquent or in foreclosure. For subprime loans, the share is much higher, about 32.33 percent of all loans.

One caution about the MBA data: It understates problems, because when a lender actually forecloses -- completing the "in foreclosure" process -- the loan is removed from the MBA count This has the effect of understating the share of borrowers who can't afford the loans they got.

I think it would be great to see where these foreclosures are happening (cities/towns)? Is that data available?

And Yet Kim Blanton says now is a great time to buy.

The Globe and Boston.com will say anything to keep the ad revenue flowing

I looked at some foreclosed homes. It was an option for our family.

Most of these homes (70-90%) are dumps. They have been terribly undermaintained, and will cost big bucks to get them back up to speed. Many are in less desirable locations. Occasionally, a nice home in a good town pops up.

In California, there are (supposedly) a greater number of nicer homes in better areas up for foreclosure. Not so in Massachusetts. At least not so far.

Middle where do you get your information on foreclosed homes?

I would be interested in seeing the total number of foreclosures broken down by property value. My contention is that the distortion in the real estate market from 2002 to 2006 was due to inappropriate lending practices and disproportionately affected starter homes. When I was looking at houses in the middle of 03, it seemed like there was nothing under $350k. This was because you could borrow $400k if you were breathing and could sign your name. Now the lower end has snapped back and the bottom feeders will start looking for rental units.

Well, you know, the Boston area is expensive. Where it used to be "I can't even afford a dump in Everett (I know not all home in Everett are dumps, BTW)"... now you can. The high end mostly holds up, but the stuff that should be cheaper is becoming cheaper as it should be, both by lower-income areas and by less maintained homes.

People always point their finger directly at the morgage companies and the speculators for the foreclosure problem happening.

Isn't it possible that some of the mortgages are just too expensive whether they are adjustable or fixed?

I am currently looking to buy a house. I am putting down my life savings which comes to 40% of the price of the house and I am willing to live 45 minutes away from my place of employment which is Brighton and I am still struggling to find properties that would give me the monthly payments that would be manageable for me. The price of Real Estate is too high! That is the problem.

While it's interesting that foreclosures are up 140% - does this really represent a return to normal foreclosure rates? What is the historic long-term foreclosure rate? Have the rates been abnormally low the past few years because the run-up in in home prices enabled people who purchased homes outside their means to repeatedly pull the equity out to continue to live above their means.

Credit Suisse expects one out of every eight Americans with mortgages to lose their homes, including 50% of all subprime borrowers. Some argue their projections are too conservative.

I wouldn't be quoting the regulators' report to prove that servicers aren't pulling their weight to help. That report has been widely savaged. It defines none of the terms it uses to cook up statistics. And it proposes ridiculous solutions, such as getting rid of "paperwork" (you know, like the check) and applying blanket solutions to people who will probably not be able to live up to their new loan terms, either. A lot of this nonsense comes from politicians looking to kick the can two and a half feet down the road.

Again, it would be really refreshing to see some hard numbers instead of speculation and opinions.

"Most of these homes (70-90%) are dumps"
"Most" is very general -- how many homes did you look at? 10? 100?

"Many are in less desirable locations"
What number, specifically, is "many"?
How do you define a "desirable location"?

Based on the data provided previously, I could easily say that "most" people in MA are paying their mortgage on time (92.54%) - and that "most" subprime mortgages are also being paid on time (67.67%)

While I do not have any hard numbers, I have looked at many foreclosed properties and am in agreement with "Middle" in that I would say that the foreclosed homes in the greater Boston area are lower end properties.

I agree with Dan that it would be useful to see the breakdown by home assessed value. It would also be useful to see the geographic breakdown by community on a map of Greater Boston, as well as on a broader map of Massachusetts.

Steve-
I bought a normal (not foreclosed) home last year, but I considered buying a foreclosing property and so I researched some. While I only have anecdotal evidence to support the claim of poor quality of foreclosed homes and their neighborhoods, it was also my impression. While everyone's definition of desirability differs, mine was rather straightforward - safety of the neighborhood. Maps of crime statistics are freely available on the web and so are maps of with foreclosing homes on them. Simple overlay of the maps revealed a strong correlation between high crime areas and amount of foreclosures. this simple correlation has pushed me away from foreclosed properties. Nothing else.

For those of you asking for more “context” and “facts” to compare with the numbers be given in this article, you may find these exact facts from previous articles. Instead of regurgitating what was previously stated, they are only stating the NEW facts.
While we all hold our own opinion and wish to be correct in our assumptions, it's clear that Boston is a very expensive market for real-estate. Kim Blanton is correct that it is a great time to buy if all the variables line up for you. Most of us have been on the sidelines “looking” and we know the reality of the market. So let us not point fingers when a bit of due diliguence will yield the same results. The practice may do you some good and keep you from being a statistic a year from now!

All I meant from my earlier post is that generalizations are just that, generalizations. Statistics can easily be manipulated to prove your point. Even easier, however, is throwing in terms like "many" and "most" with no context around them whatsoever. Saying, for example, that all foreclosed properties are dumps and in crime ridden areas is a sweeping generalization. I bought a foreclosed property this summer in Newton - the property was in excellent condition and in a town and neighborhood hardly known for its rampant crime rate. All I asked for was some concrete examples - instead of "most of these homes are dumps", "I looked at many properties" or "foreclosed homes in the greater Boston area are lower end properties". How many homes did you look at? Where did you look? It's all a matter of perspective. We happened to find a foreclosed home that we loved - maybe it's a dump in your eyes, but not ours.

In response to several questions -

I signed up for a few months into ForeclosuresMass.com.

I looked at foreclosed properties in Metrowest (Framingham, Southborough, Westborough, Northborough, Marlborough, Ashland, Natick).

About 80-120 properties were investigated using addresses, some I drove by and even (illegally I might add) strolled the lot, some I used Zillow to inspect or MLS pictures. I only saw one nice new home in the entire region up for foreclosure, which eventually short-saled for 680k. Even that home had a yard that went to hell and a nasty wasp population in the roof visible from the back yard, but at least it was in Southborough on a nice road. Most were tiny, undermaintained homes in lower-cost neighborhoods.

One home in our current Framingham neighborhood recently foreclosed. The home is surrounded with overgrown bushes, rotting trim, failed windows. Its a dump in a nice neighborhood - an eyesore that hurts everybody else. I hope it sold for little enough to allow somebody to just plow it down. Thank the lord the owners are finally out. They had 3 nice 60k Mercedes, so they werent poor. They just decided to live large and save their cash and let their American home go to hell since they arent from here. And all of the liberal groups are thinking "boo-hoo poor people losing their home ... evil banks are to blame!". Im so sick of it. Add to the list of foreclosures wealthy immigrant families, saving their cash, not investing a dime into maintenance and skipping out on mortgage payments.

Anyhow, I dont want to be too degrading of some of these homes, but honestly - most of those homes up for foreclosure in MA are dumps. You know it, I know it.

Middle, thanks for the clarification - that helps me better understand your perspective.

Am I correct to assume that these foreclosure stats do not include short sales?

Kyle,

That's correct. Short sales are counted separately.

I'm new to this forclosure market and terminology.
Short sales? What are these?
Is there a web site that anyone suggest for me to guide me.

I own my home, but I am looking for my son who would be a first time home buyer. I thought the current market would be a good time for him to buy, and a bank owned foreclosed property would be a better "deal" . After reading your posts, I have some doubts.

Your suggestions & comments are appreciated. Thanks!

Linda M.

A short sale is a sale where the bank will agree that the property can sell *short* of what is owed on the mortgage. The bank does not own the property at this point, as in a foreclosure. The bank must be willing to accept an offer. The seller has has little or no say in how the transaction proceeds.

The process is a bit different than a traditional sale. For one thing you can and should do an inspection for your own information but you won't be able to negotiate for anything as a result of what is found during the inspection. And the whole process takes longer. You can put in an offer and then wait and wait for the bank to get back to you, weeks or even months. Definitely have an attorney and agent who are familiar with the process as they will help you draft an offer and negotiate the Purchase and Sale items to protect your interests. It is not impossible to get through but just different than the usual.

This said, your son could get a good deal with a short sale.

Hope that's been helpful.