Editor’s Note: the following is an excerpt from the August 2014 edition of the Housing News Report, a monthly newsletter published by RealtyTrac.
Foreclosure starts in the Boston metro area increased 17 percent in July compared to a year ago, the fifth consecutive month where foreclosure starts have increased annually in the region.
Those five consecutive months of increasing foreclosure activity come on the heels of a long downward trend in foreclosure starts in Boston. Prior to January 2014, there were 13 consecutive months where foreclosure starts in the metro area decreased on a year-over-year basis.
But the rebound in foreclosure starts doesn’t come as a big surprise in a state that has seen aggressive foreclosure prevention efforts on the part of all three branches of government: the state attorney general, the state legislature and the Massachusetts Supreme Judicial Court (SJC).
Jim Regan, owner of Regan Auctioneers, an auction company that conducts foreclosure auctions on behalf of foreclosing banks in the Boston area, said his business swings wildly from month to month depending on the latest court case involving “stories of predatory lending” or new laws that “seem unfair to the mortgagee (bank).”
“But that’s where the votes are,” said Regan, noting in some months he’ll conduct 15 auctions and in some months none.
During the worst of the housing crisis Regan said he conducted as many as 23 auctions in one day. Even during the busy months now it’s nowhere close to that volume, although the recent surge in foreclosure starts may translate into more business for him in the next six months to a year.
More owner-occupants buying at foreclosure auction
Despite the erratic supply of foreclosure auctions, demand is more broad-based than ever, according to Regan, who said he’s noticed more owner-occupant homebuyers bidding at the auction, which in Massachusetts — unlike most other states — are conducted at the house being auctioned and don’t require the full amount in cash on the spot.
Homebuyers, who are going to live in the home, I would say it’s about equal to investors,” he said of the breakdown of auction buyers.
Foreclosure auction bidders in Massachusetts are required to come armed with a cash deposit, typically between $5,000 and $10,000, to qualify to bid. The winning bidder must come up with the full balance of the winning bid within 30 to 45 days, according to Regan.
“People are more educated about auctions,” Regan said of what is driving the trend. “At one point most people were scared to buy at auction.”
Owner-occupant buyers crowding into what has traditionally been an investor bastion — buying at the foreclosure auction — could also be the result of fewer homes listed on the resale market, forcing buyers to get more creative.
“I hear all the brokers complain there is no product on the market. There is nothing to sell,” said Regan. “The market is drying up. What is for sale, the listings are scarce right now.”