Friday, February 25, 2011

Reasons for optimism in real estate

Today's Lowell Sun has a front-page article about the direction of real estate. Several people interviewed (including me) see signs of a recovery while others were more pessimistic. My optimism is based on two trends I have watched since October: the number of mortgages being recorded is up from a year ago and the number of foreclosure-related documents is down. I see both of these as leading indicators of a real estate bounce-back.

Taken as a whole, 2010 was a pretty dismal year, seemingly much worse than 2009. But if you just look at the Fourth Quarters of the two years, 2010 was much better. To get the most up-to-date numbers, I compared the number of mortgages, foreclosure deeds and orders of notice recorded in the Middlesex North District from October 1, 2010 to February 24, 2011 (yesterday) with those recorded in the same period a year ago. Here's what I found:

Mortgage recordings were up 38% (6536 v 4744)
Foreclosure deeds were down 50% (218 v 109)
Orders of Notice were down 57% (602 v 246)

The significance of the drop in foreclosures is self-evident, but mortgages are important because in 2003, a dramatic rise in mortgage recordings signaled the beginning of the real estate boom. While we don't want to revert to the chaos of that period, we would welcome a rebound in home prices, something that very well might follow behind this uptick in mortgages.


Anonymous said...

Couldn't the foreclosure numbers just be a temporary pause while lenders try to sort out what they got nailed for in the Ibanez case? Is there a way to distinguish between mortgages that were the result of purchases and ones that were merely refinancing? Lower rates would certainly spur refinancing. Also, why cheer an increase in prices? Unaffordable housing is a thorn in the side of the Boston area and lower prices would be better for the economy in the long run, even though they would be painful to individuals who bought recently.

Dick said...

Those are all valid points. I think it's more than a Ibanez-driven stand down because the decline is so extreme. Not every mortgage has a shaky assignment paired with it. I suspect lenders are more realistic about what can be achieved in foreclosure, so they're more willing to modify loans or assent to short sales, so that's also driving the numbers down. As for the benefits of rising prices, so many people remain underwater that an uptick in prices will unlock many from mortgages that have them trapped, allowing them to refinance or sell and downsize or move somewhere for employment purposes or any other reason. I don't want nor advocate a return to the price madness of 2005-06, but something higher than what we have now would be beneficial for almost everyone