This is a little blog post I wrote for my company.
Headlines:
Housing Gloom Deepens – Wall Street Journal 10/26/10 “To be sure, the housing market is faring better in several metro areas, particularly those with decent job growth such as parts of Texas and Washington, D.C..”
Mass. unemployment rate falls to 8.4 percent – Boston Globe 10/22/10 “The Massachusetts unemployment rate last month fell to its lowest level in more than a year…The jobless rate dove to 8.4 percent from 8.8 percent in August.”
Fed: N.E. economy continues modest growth – Boston Herald 10/21/10 “Boston area economic activity continues to see slight improvements according to a Federal Reserve Survey”
With interest rates at 1951 levels, refinancing is a surefire way to save money – Boston Globe 10/21/10 “Borrowers can finance their home purchase for an average 4.2 percent on a 30-year fixed-rate loan, Freddie Mac reported.”
O&A View:
The news this week has been focused on foreclosures. Since the financial crisis in 2008, petitions to foreclose which is the first step in the process, have been rising nationwide. Additionally three major banks chose to suspend foreclosure proceedings, and the sale of foreclosed properties in their inventory, as questions arise regarding the integrity of the loan and foreclosure documentation. Economists fear that an increase in inventory in many markets will slow the economic recovery and suppress home values, especially in markets where unemployment remains high.
The Wall Street Journal article noted above, points out the regional differences in housing markets, specifically referring to metro areas with “decent job growth” which are faring better, and have a housing market recovery under way. The correlation between job growth and housing recovery is further highlighted when comparing the inventory of REO’s; Real Estate Owned by banks and state unemployment rates. According to data from RealtyTrac® (foreclosure activity 10/15/2010); three states, California, Florida and Michigan; lead the nation in REO’s with 50,935, 21,729, and 14,997 properties owned by banks. Those states have unemployment rates of 12.4%, 11.9% and 13.0% respectively according to data from U.S. Bureau of Labor Statistics (September 2010).
According to the same sources, 1,728 properties in Massachusetts are currently bank owned and the state unemployment rate is 8.4%. While various regions of the nation are affected by the foreclosure issues we see very little foreclosure activity in the Downtown Boston market and very few forced sales as a result. In addition the state unemployment rate is lower than the national average and continues to move lower. These and other factors are what makes the Downtown Boston housing market contrarian.
robertmbyrne 