Friday, January 22, 2010

Real Estate Trends from 2009

The following is an article I wrote for the January 2010 issue of the Merrimack Valley Housing Report. The January report also contains an article by Dave Turcotte with his real estate predictions for 2010 was well as statistics for the Merrimack Valley cities of Haverhill, Lawrence, Lowell and Methuen. The webpage of the Housing Report is located here.

When it comes to tracking real estate activity, the registry of deeds provides a unique vantage point. Our data is not comprehensive – we lack information regarding the use of properties – but by counting and comparing the number and type of documents recorded, we are able to observe and comment on trends.

The 65,383 documents recorded in 2009 was the second lowest annual total in the previous fourteen years. The good news is that the number of documents recorded in 2009 was 18% higher than the 56,011 recorded in 2008 which could suggest that things are improving if only slightly. The amount of revenue the registry collected in recording fees tends to corroborate this observation. In 2008, recording fees accounted for $4.5 million in revenue, but in 2009, they accounted for $5.3 million, an increase of 18%. Another positive sign may be found in the number of mortgages recorded. The 14,519 recorded in 2009 represented a 31% increase over the 11,108 recorded in 2008.

Unfortunately, some negative indicators force us to restrain our optimism. The core of the mortgage market’s strength, for example, occurred in April through August with the volume receded significantly in the fall and early winter. While the number of foreclosure deeds recorded in 2009 was down 33% from 2008, the foreclosure deeds recorded in the second half of 2009 exceeded those recorded in the first half by 24%. The increase in orders of notice – the document that commences foreclosure proceedings - was even more dramatic, rising from 216 recorded in the first half of 2009 to 536 in the second half, a jump of 148%. Another negative indicator is a decline in collections of the deeds excise tax, a tax assessed at a rate of $2.28 per $500 of sales price. The $5.1 million in deeds excise collected in 2009 was a drop of 19% from the $6.3 million of 2008. Because there was essentially no change in the number of deeds recorded (5,409 in 2008 versus 5,434 in 2009), this indicates that sales prices have dropped markedly. While such a decline might be a necessary part of a post-bubble correction, it also means that many homeowners who bought or refinanced during the boom will continue to owe more on their mortgages than their properties are worth, a circumstance bound to keep the volume of foreclosures high during 2010.

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