In Business : Silver lining in Martha's Vineyard foreclosure numbers
An analysis of Martha's Vineyard land records shows that property foreclosures rose in 2011, for the third consecutive year. But the statistics also suggest foreclosures will decrease significantly this year.
Several real estate executives are cautiously optimistic that the Island housing market is in the initial stage of a recovery.
According to records at the Dukes County registry of deeds, 37 foreclosure deeds were recorded in 2011. Foreclosure deeds totaled 32 in 2010, and 29 in 2009. By contrast, three foreclosure deeds were recorded in 2006.
A foreclosure deed is the final step in a long trail of foreclosure filings and notices, usually recorded after a lender takes legal possession of a property.
The foreclosure deeds reflect only those properties that went through the entire foreclosure process. The number of property owners losing their houses, though difficult to quantify, is certainly higher. Legal filings do not measure "short" sales and other private transactions forced by the threat of foreclosure.
The records also show a reversal in the rising trend of recorded orders of notice. An order of notice is the first step in the foreclosure process.
In 2011, 60 orders of notice were recorded at the registry. That is down substantially from the 92 filed in 2010, and the 79 filed in 2009.
While not an exact measure, the incidence of such filings gives a general indication of the number of foreclosures in the real estate pipeline.
An order of notice is a public declaration that the lender intends to foreclose, but does not necessarily result in a foreclosure. It can take from six months to a year, sometimes much longer, for the process to play out. In some cases, property owners who get an order of notice find a way to avoid foreclosure, by refinancing, selling, or paying the debt on the property.
The number of houses sold, the median price, and the value of those houses all fell substantially in 2011, compared to 2010, according to records from LINK Martha's Vineyard, a multiple listing service for Island property.
The number of houses sold fell from 351 in 2010, to 319 in 2011, a decrease of 9.1 percent. The total value of houses sold fell 19 percent, from $369,860,000 in 2010 to $299,522,000 in 2011. The average price of a house fell from $1,054,000 to $939,000, a decrease of 10.9 percent. Since the latest Island real estate boom in 2007, the average price of a house has fallen 34 percent. The dramatically lower house prices closely reflect the trend nationwide. According to real estate records, it took five years to reach the low point here, while it took the national average two years to reach the low point.
Because some houses are sold before the legal process of foreclosure is complete, it is difficult to track distressed property sales. Several real estate professionals estimate that about 10 percent of house sales involve houses in foreclosure, or under threat of foreclosure.
While a number of factors combined to depress prices from historic levels, it is difficult to gauge the effect of foreclosures on the real estate market.
Two prominent Island real estate executives, however, see cause for optimism in a strong fourth quarter of 2011.
Alan Schweikert, with nearly 40 years of experience in the Island real estate market, said foreclosure properties affect the unique Vineyard market in different ways than places like Florida or Michigan, where distressed properties have contributed to deep economic woes.
"I don't think there are enough foreclosures here to make that much difference," Mr. Schweikert, president of Ocean Park Realty Inc., said. "Martha's Vineyard itself, we seem to come out of recessionary periods faster than other places, so we're in many respects, a leading indicator. Most foreclosures that come up sell fairly quickly. In some ways, because there's not that many, it has been good for the market. We've sold a number of foreclosures, and most of them were purchased by first time buyers, young people.
Mr. Schweikert is bullish on the Island's housing market.
"Without a doubt, we are coming out of this," he said. "Speaking just for my own office, this year has been much better than the last two."
Sean Fedorowicz, an owner and broker at Coldwell Banker Landmarks Real Estate, is watching closely to determine if the current housing market is the "new normal."
"Based upon the fourth quarter transaction activity on the Island, there is reason for guarded optimism that signs of improvement are already underway," Mr. Federowicz said in a statement analyzing the 2011 real estate market. "This behavior should continue into the new year especially if interest rates remain near historic lows, pricing continues to reflect relative values, and consumer confidence strengthens."
He sees pent-up demand in the market, with a large number of potential house buyers looking at property in the final months of 2011.
"We're still working with a number of buyers that were priced out at the height of the market, that have not gone away," Mr. Federowicz said in a phone interview. "They're sitting on a pile of cash. Realistically, you're hearing corporate earnings, banking, and housing sectors are recovering. It's not running wild, but there are select pockets."
View Martha's Vineyard Forclosure Deeds 2006-2011 in a full screen map
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