Is the foreclosure crisis still a crisis? Perhaps not, at least according to a Waltham-based analytics firm.
Pro Teck Valuation Services has released a new, zip-code level look at the state of the real estate market which suggests that for the bulk of the state, the worst effects of the market’s dive may have already passed.
The company’s Home Value Forecast tracks sales data nationwide using data from U.S. Core Based Statistical Area data provided by the U.S. Census Bureau. It measures market activity using a suite of factors, including number of sales and active listings, median sales price, list price, days on market and months of inventory remaining, to come up with a score for how “hot” or “cold” a market really is.
Their granular data suggest a market that’s far patchier than simple generalizations like “metro Boston rebounds” might indicate, with some surprising areas of stability. It also suggests that when it comes to the effect of distressed sales on a market, real estate is more than local – it’s micro, with big swings from one zip code to another.
“There’s a contagion effect where REOs pull down all home prices,” said Pro Teck President & CEO Tom O’Grady. “Some cities are affected and some aren’t. If you roll it all up and look at New England,” as a whole, then REO is still a problem.
But for many communities the worst has already passed.
“It’s really just the distressed communities that are still suffering from the REOs and will continue to be suffering for a little bit longer,” O’Grady told Banker & Tradesman.
While many of the commonwealth’s major cities are among those areas still suffering from declining markets, Pro Teck’s analysis shows smaller Central Massachusetts towns like Orange, Athol and Gardner are among those currently struggling the most with current market conditions. And though tony towns like Weston and Wellesley or tech-boom hotspots like Cambridge are clearly among the healthier markets, communities like Burlington and Reading on the North Shore and Rochester on the South Coast show surprising strength.
Still, O’Grady said he is cautious regarding the prospect of a full-bore recovery anytime soon.
“I don’t think New England as a whole will decline in value, but I think any gains are going to be fairly modest for the next couple years here,” he explained.
Much depends on how the remaining REO out there unwinds. Pro Teck’s data clearly shows that spikes in REO inventory quickly drag down REO prices, which in turn drags down sales prices for non-distressed properties in such areas. In foreclosure-plagued Worcester, median sales price for REO in 2006 – before the crisis – was $222,000, just $9,000 less than for non-distressed homes.
But as the crisis has dragged on, REO inventories increased and REO median sales priced dropped – all the way to $110,000 in the fourth quarter of 2011. This, in turn, dragged the median non-distressed price in the city along with it, to $167,000.
While REO and non-distressed prices have begun to creep closer together in recent months – a sign of stability in the market – any sudden surge in distressed inventory could send them plummeting again.
