Tuesday, May 21, 2013
An op-ed in today's Globe by Paul McMorrow, an associate editor at Commonwealth Magazine, provides a keen assessment of the state of housing in Massachusetts today. Contrary to all of the glowing reports of a vibrant housing recovery in the mainstream media, real estate continues to be sluggish. McMorrow concurs, describing the current state as "less bad news masquerading as good news." He acknowledges that in certain communities, housing is booming but in most of the Commonwealth's cities and towns, particularly those hit hardest by foreclosures, the recovery is lagging. McMorrow does agree that new foreclosures have dropped substantially but he attributes this not to an overall recovery of housing but to the positive consequences of a series of foreclosure-related statutes enacted by the state legislature last year. All amendments to Chapter 244 (Foreclosures), these new laws imposed a number of requirements on lenders prior to foreclosing. Most significant, perhaps, was an obligation on lenders to consider mortgage modifications before foreclosing. Our own statistics here at Middlesex North tend to corroborate this drop in foreclosures. From January through April of 2012, for instance, there were 75 foreclosure deeds recorded for property in Lowell. For the same four months this year, that number dropped to 28. Along with a reduction in foreclosures, I suspect this new law has increased the number of short sales that are occurring. The term "short sale" describes a situation in which the seller owes more money on the mortgage than the house is worth, but the lender acknowledges this and agrees to release the mortgage upon payment of less than the full principal owed at the time of the sale to a third party. A review of home sales in Lowell during April discloses that many of the sales were made by homeowners whose initial mortgage amount exceeded the sales price of the property. While that is not absolute proof that a short sale has occurred, it's a pretty good indicator of one. Short sales aren't great for the market, but they're much better than foreclosures, so this is a positive development.