Thursday, June 07, 2018

A Few Observations on Local Real Estate

I recently posted the Lowell Real Estate Report and the Middlesex North Foreclosure Report on the Real Estate Reports page of the registry of deeds website. Based on these reports and on others I’ve prepared, I have a couple of observations about the local real estate market:
The number of sales from January through May 2018 is about the same as in Jan-May 2017, but prices seem to be up by 10% or more (based on our deeds excise tax collections and on median deed prices I've calculated). It's a good time to sell but not many people are selling, likely because they couldn't afford an upgrade to their current homes.

There are still a lot of foreclosures: Jan-May 2018 there were 106 versus 92 for the same period in 2017 (again, district-wide). The bulk of the mortgages being foreclosed originated during the real estate bubble (2003-2008). I don't know why after 10 years these mortgages are being foreclosed now. Have the people not been paying all along and the banks just failed to foreclose, or did the homeowner suddenly encounter some financial crisis like divorce, illness, job loss and lose the house to more recent causes? 

One thing is clear: almost all the bad mortgages were by national lenders. It's very rare to see a local bank doing a foreclosure. Their performance now and during the foreclosure crisis is a positive story that may not have gotten the attention it should have.

Also regarding foreclosures, the foreclosing lenders are increasingly willing to sell at auction to a third party whereas traditionally the lender was the purchaser at foreclosure. This suggests that auction bids are higher which makes sense given rising values. Quite a few of these third party foreclosure buyers are LLCs which are likely in the business of either (1) flipping properties or (2) owning a lot of rental properties. This has some long term implications if multifamily rental properties that were once owner-occupied increasingly come under the ownership of distant investors who might be less committed to the neighborhood and the community.

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