The lingering effects of the foreclosure crisis have no entirely burned away – but out of the ashes, the state’s Gateway Communities are already rising, a new look at foreclosure data reveals.

As reported by The Warren Group, publisher of Banker and Tradesman, foreclosure petitions have increased in recent months, with the number of foreclosure petitions rising 12.8 percent through the first six months of 2014 as compared to the same time last year. The number of petitions in June 2014, 488, was nearly double the amount in June 2013, when there were 245, according to The Warren Group’s data.   

But a closer look at the properties being foreclosed on reveals that these are “properties that were purchased or refinanced in 2004, 2005, 2006,” said Tim Davis, an independent housing research analyst and author of the Massachusetts Housing Partnership’s (MHP) quarterly Foreclosure Monitor report.

In addition, fewer of the properties which enter distress are ending up in bank hands, Davis said. “Once property values increase, homeowners have more options,” and with plenty of eager buyers in the market, and banks more willing to countenance short sales, even if a homeowner has fallen behind on their mortgage they may be able to escape foreclosure itself.

That’s been a boon to the state’s so-called “gateway cities,” 26 urban areas scattered around the state, most of which have been struggling to recover from the decline of the industries which once spurred their economies. The gateway cities have been harder hit than the rest of the state by the foreclosure crisis, with neighborhoods in places like Brockton and Springfield perennially leading the list of blight-struck zip codes.   

That’s beginning to change, according the latest report compiled by Davis. The overall recovery of the state’s housing market and the increase in prices, particularly in the Boston metropolitan area, have caused distress rates to converge across the state.

When the foreclosure crisis began, it was urban area which were the focus of most of the subprime lending in the state that were earliest and hardest hit, with foreclosure rates spiking there beginning in 2006. Only after the broader U.S. economy and economic crash of 2008 caused widespread job losses did suburban area begin to see a similar wave of foreclosures.

But over the past few years, those trends reversed, particularly in Boston, where core industries like biotech, education and health weathered the recession better than many others across the country. Home prices in the Boston metropolitan are have rapidly recovered, leading to an 85 percent decline in the city’s distress rate, according to the MHP’s calculations, with the city going from 15.3 units per 1,000 housing units in 2009 being in some form of distress to 2.3 in 2014, better than the state average.

Now the state’s gateway cities are also beginning to catch up, leading to a convergence in distress levels across the state. By Davis’ estimation 2009, 42.4 percent of the states’ distressed housing units were located in suburban and rural areas, even though these areas contain 64 percent of the states’ housing units. By July 2014, that’s jumped to 54.8 percent, with only 5.7 percent of distressed units located in Boston, and 39.5 percent in gateway cities.

In recent months all 26 gateway communities saw year-over-year declines in distress. The largest decline was in Everett (-63 percent), followed by Malden (-59 percent), and Worcester (-55 percent). Six of these communities — Salem, Westfield, Peabody, Everett, Quincy, and Malden — have rates of distress that are lower than the state as a whole.

But even it there’s light at the end of the tunnel, that doesn’t mean the struggles are over for these areas, warns Clark Zeigler, executive director of the MHP.

“If you look at the urban areas where some of the subprime loans were concentrated, those areas have a problem with disinvestment going back for decades. Those problems were there before the foreclosure crisis and are going to be there afterward,” he said.  

In light of the continuing improvement on the foreclosure front, the partnership has decided to discontinue its Foreclosure Monitor series of reports. Though it will continue to track, analyze and report on the state of the housing market in the Bay State, the group now plans to broaden the focus of its analysis to some of the long-term economic development issues and efforts that affect the gateway cities, Zeigler said.

Email: csullivan@thewarrengroup.com