Foreclosures Cast Long Shadow Across Northeast Region
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Foreclosures Cast
Long Shadow Across
Northeast Region
D a v i d T u rc o t t e , R o b e r t F o rra n t ,
J o h n F ra s e r , and Shuwen Liu
nearly four times higher than two years ago, according to
Growing impacts on neighborhoods and The Warren Group, a Boston-based publisher of real estate
communities spur new initiatives data. Nearly 12,500 foreclosure deeds were recorded in
by local groups to find effective remedies. 2008, compared with 7,653 in 2007 and 3,130 in 2006. A
sizeable number of these foreclosures occurred in the North-
east Region. The Warren Group reported that the median
Increased foreclosures, abandoned properties, and falling price statewide for a single-family home was $323,000 in
home prices in the Commonwealth’s Northeast Region August 2008, down seven percent from the same time last
have left city managers and mayors struggling with dif- year and the lowest August figure for seven years.
ficult budget decisions. In February 2008, Lowell City In the Northeast region’s two largest cities, Lawrence
Manager Bernard Lynch stated, “[Dealing with foreclo- and Lowell, foreclosure filings will approach record numbers
sures] is going to be a real challenge, as if the city didn’t in 2008. Lawrence’s high mark of 416 foreclosures in 1992
have enough challenges. You have a lot of people that are is very likely to be surpassed; for the first ten months of 2008
very stable residents and property owners in these neigh- there were 396 foreclosure filings, exceeding the 262 fore-
borhoods. They keep their properties up and something closures for all of 2007. The foreclosures could spell hard
happens next to them or a couple houses away and it just times for Lawrence where, according to Yovani Baez, real
ripples through the neighborhood. We have to keep on estate project manager for Lawrence Community Works, “a
top of this, but we’re limited in our powers because gov- lot of progress has been made over the last few years, but
ernment only has so many powers when it comes to pri- the foreclosures may undermine this progress long-term by
vate property.”1 increasing vacancies and neighborhood blight.”2
What’s going on? Massachusetts home foreclosures For Lowell, the previous high foreclosure mark of
soared 62 percent in 2008 compared with 2007 and were 375 in 1993 is in reach; there were 315 foreclosures there
Figure 1: Number of foreclosure deeds in Lawrence and Lowell, 1987 to 2008
500
Number of Foreclosure Deeds
400
Lawrence Lowell
300
200
100
0
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2008
*This number is generated by actual number of foreclosures Jan-Sept and forecasts based on monthly average.
Sources: Essex North Registry of Deeds and Middlesex North Registry of Deeds
MassBenchmarks 2009 • volume eleven issue one 19for the first ten months of 2008. Middlesex North Regis- revenues to fund city services. School systems have intro-
ter of Deeds Richard Howe predicts that 2008 and 2009 duced ‘pay to play sports’ and ‘pay to ride the bus’ fees.
could exceed the 1993 figure because so many five-year This all comes at a time when, according to the Massa-
adjustable mortgages filed in 2003 and 2004 in Lowell chusetts Budget and Policy Center’s Noah Berger, there
“involved low introductory interest rates, interest-only is already “too much reliance on local property taxes as a
mortgages, and other creative financing programs that source of revenue for essential services.”
allowed people to purchase homes they simply could not In Chelmsford the ‘double whammy’ translates to a
afford. When the payments on mortgages such as these 2.8 percent increase in the average single-family property
reset, the payment may increase dramatically, in some tax bill for 2008 over 2007, even though home values
cases doubling, to make up for the artificially low pay- dropped there an average of 4.6 percent. For Dracut, the
ments early in the life of the mortgage.”3 tax bill climbed 3.7 percent, while home values fell 4.7
Foreclosures are taking place in all types of hous- percent and for Tewksbury the figures are 2.9 percent and
ing, including condominiums, single-family homes, and –2.4 percent respectively. Across all twenty communities
apartment blocks. Haverhill, for example, experienced in Greater Lowell, property values declined about 1.1 per-
117 residential foreclosures from January to July 2008. cent while property taxes increased by 2.9 percent.5 Fur-
Of those foreclosures, 36 percent were single families, 19 ther north up the Merrimack River, in Lawrence, the good
percent were two-family dwellings, 17 percent were three news that property values went up 1.6 percent was dramat-
or more family buildings, and 28 percent were condo- ically offset by an average 10.3 percent increase in property
miniums. In Lowell and Lawrence, foreclosures on multi- taxes. Next door in North Andover, assessed property val-
family homes accounted for 46 percent and 73 percent of ues dropped an average of 4.1 percent while average tax
foreclosures, respectively.4 bills increased by exactly the same percentage.6
For homeowners, the struggling mortgage and hous- Behind these statistics is the disturbing fact that many
ing market has resulted in a drop in the valuation of their more people who are still in their homes cannot afford to stay
largest asset and, to add insult to injury, increased prop- in them — yet they cannot afford to move either. Escalating
erty taxes as communities attempt to raise badly needed rents and falling wages caused by the continued loss of well
Percentage change
Change in Property Taxes and Assessed of assessment
-10% to -6%
Values of the Average Single-Family Home, -6% to -3%
Communities in the Northeast Region -3% to -0.4%
1.9
4.3 -0.4% to 0.4%
4.2 Salisbury
Amesbury 0.4% to 3%
Merrimac 0.2 3% to 5%
3.6 Newburyport
2.6 1.4
W. Newbury
Haverhill 4.3
Newbury
6.6
10.3
Groveland
3.3 5.9
Methuen Georgetown
1.3 3.7 Rowley 4.3
5.7 Lawrence 4.6 5.2
2.2 Tyngsborough Dracut Ipswich
Pepperell Dunstable N. Andover 6.6 2.1
2.1 Boxford 3.9
1.0 11.2 5.3 Rockport
Andover 2.9
Lowell Topsfield Essex
2.9 3.4 Hamilton Gloucester
1.8 Tewksbury 4.7 3.8
2.8 Middleton 4.9 Wenham
Westford Chelmsford 5.7 N. Reading 3.0 Manchester
2.5 Danvers
Percentage change
Beverly
Billerica Wilmington 2.2 2.5 0.9
of property tax
Reading Lynnfield Peabody 5.9
3.3
10.0%
Salem Marblehead
5.0%
2.5%
Source: Massachusetts Department of Revenue Division of Local Services, Municipal Databank Local Aid Services.
Note: Average single family tax bills are calculated by dividing the single family assessed value by the single family parcels for each community and then multiplying the average by the
residential tax rate and dividing by one thousand.
20 MassBenchmarks 2009 • volume eleven issue oneF
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Change in Property Taxes and Assessed Values of the Average Single-Family Home,
Communities in the Northeast Region
Municipality Average Value Average Value Percent Change Single Family Single Family Percent Change
FY 2007 FY 2008 FY 2007 to 2008 Tax Bill FY 2007 Tax Bill FY 2008 FY 2007 to 2008
Amesbury $366,423 $344,464 -6.0% $4,822 $5,029 4.3%
Andover $591,798 $581,568 -1.7% $6,658 $6,799 2.1%
Beverly $454,936 $456,848 0.4% $4,613 $4,751 3.0%
Billerica $349,998 $351,433 0.4% $3,780 $3,873 2.5%
Boxford $674,891 $677,925 0.4% $7,059 $7,423 5.2%
Chelmsford $396,327 $378,123 -4.6% $4,966 $5,105 2.8%
Danvers $432,878 $406,848 -6.0% $4,034 $4,231 4.9%
Dracut $318,811 $303,879 -4.7% $3,092 $3,206 3.7%
Dunstable $446,859 $459,111 2.7% $5,058 $5,344 5.7%
Essex $517,232 $515,214 -0.4% $5,198 $5,539 6.6%
Georgetown $440,474 $442,829 0.5% $3,986 $4,118 3.3%
Gloucester $524,446 $510,540 -2.7% $4,515 $4,646 2.9%
Groveland $396,239 $398,533 0.6% $3,871 $4,037 4.3%
Hamilton $544,434 $538,850 -1.0% $6,849 $7,215 5.3%
Haverhill $311,155 $313,117 0.6% $3,211 $3,294 2.6%
Ipswich $536,327 $504,300 -6.0% $4,462 $4,655 4.3%
Lawrence $231,147 $234,949 1.6% $2,133 $2,352 10.3%
Lowell $269,355 $272,315 1.1% $2,858 $2,887 1.0%
Lynnfield $597,971 $581,038 -2.8% $5,687 $5,828 2.5%
Manchester $1,045,042 $1,049,785 0.5% $7,618 $7,905 3.8%
Marblehead $762,250 $732,416 -3.9% $5,915 $6,108 3.3%
Merrimack $406,085 $391,949 -3.5% $4,057 $4,229 4.2%
Methuen $312,890 $314,049 0.4% $3,019 $3,219 6.6%
Middleton $527,956 $552,873 4.7% $5,179 $5,357 3.4%
Newbury $495,516 $482,636 -2.6% $4,078 $4,136 1.4%
Newburyport $488,111 $486,986 -0.2% $4,925 $4,933 0.2%
North Andover $536,831 $514,626 -4.1% $5,610 $5,867 4.6%
North Reading $512,389 $504,585 -1.5% $5,544 $5,803 4.7%
Peabody $389,654 $351,845 -9.7% $3,024 $3,050 0.9%
Pepperell $337,831 $346,512 2.6% $3,412 $3,486 2.2%
Reading $461,656 $452,066 -2.1% $5,572 $5,696 2.2%
Rockport $550,415 $539,417 -2.0% $4,431 $4,526 2.1%
Rowley $427,306 $426,325 -0.2% $4,179 $4,425 5.9%
Salem $355,319 $347,426 -2.2% $3,827 $4,054 5.9%
Salisbury $360,359 $355,174 -1.4% $2,948 $3,005 1.9%
Tewksbury $377,576 $368,408 -2.4% $3,742 $3,850 2.9%
Topsfield $583,145 $583,028 0.0% $6,747 $7,008 3.9%
Tyngsborough $381,687 $369,939 -3.1% $4,275 $4,332 1.3%
Wenham $636,433 $639,334 0.5% $7,427 $8,260 11.2%
West Newbury $543,049 $535,129 -1.5% $5,859 $6,068 3.6%
Westford $470,337 $467,844 -0.5% $6,161 $6,269 1.8%
Wilmington $401,598 $402,698 0.3% $3,871 $4,091 5.7%
Source: Massachusetts Department of Revenue Division of Local Services, Municipal Databank/Local Aid Section
Average single family tax bills are calculated by dividing the single family assessed value by the single family parcels for each community and then multiplying the average
value by the residential tax rate and dividing by one thousand.
Data in this file are derived from the LA4 and the Tax Rate Recapitulation Sheet submitted by local officials to the Division of Local Services.
MassBenchmarks 2009 • volume eleven issue one 21paying jobs, have created an ‘affordability crisis’. Accord- to make this accommodation ‘affordable’. Yet about 45
ing to Lowell’s Coalition for a Better Acre and other hous- percent of Lowell households earn under $35,000.
ing affordability advocates, the typical rule of thumb is that As University of Massachusetts Lowell Professor of
‘affordable’ means a family spends 30 percent or less of its Regional Economic and Social Development Philip Moss
annual income on shelter. But, growing numbers of people puts it: “The problem of affordable housing in Lowell, and
are forced to spend more than this on housing. Here’s an other places like it, is not just about a lack of living units
example. A typical two-bedroom apartment in Lowell rents at reasonable prices. It is also about the lack of wage and
for around $1,100 a month. According to the 30 percent income growth among moderate- and lower-income fami-
measure, a family would need a yearly income of $44,000 lies in Lowell and elsewhere.” That is, an increase in the
Negative Equity
Negative equity in a house refers to a situation in England states for which data are available all exhibit
which the market value of a house falls below the negative equity rates below the national norm, though
remaining mortgage value. The incidence of negative New Hampshire did make it into the top ten of states
equity rises during periods of falling house prices. It ranked by their percentage of negative equity mortgag-
can be a “leading indicator” of further deterioration es. Massachusetts’ incidence of negative mortgages is
in housing markets, as it often presages foreclosures 10.4%, as compared to a national standard of 18.3%,
and abandoned mortgages. Both events, by pushing and the state is 30th among all states in this measure.
more houses on markets with already-falling prices, The state with the highest percentage of negative
can result in further price weakening. equity mortgages is Nevada, with 47.8% of all house
market values below their mortgage balance.
The accompanying table exhibits data measuring the
incidence of negative equity mortgages, by state.1 The NOTE
states included in the table are those with the ten high- 1. The source of the data is First American CoreLogic,
est frequencies of negative equity mortgages, plus the as of October, 2008.
New England states where data are available. New
Negative Equity by State, Top Ten States and New England
Ranking State Mortgages Negative Equity Negative Equity
Mortgages Share
1 Nevada 609,577 291,190 47.8%
2 Michigan 1,145,572 442,720 38.6%
3 Florida 4,248,470 1,241,812 29.2%
4 Arizona 1,287,076 375,469 29.2%
5 California 6,461,981 1,772,254 27.4%
6 Georgia 1,456,327 338,495 23.2%
7 Ohio 1,905,000 419,002 22.0%
8 Colorado 1,045,773 191,893 18.3%
9 New Hampshire 144,479 24,901 17.2%
10 Texas 2,721,638 449,243 16.5%
22 Rhode Island 207,145 25,015 12.1%
30 Massachusetts 1,390,757 144,168 10.4%
40 Connecticut 678,766 50,001 7.4%
U.S. Total 41,788,563 7,628,234 18.3%
* This data set only includes properties with a mortgage. Non-mortgaged properties are by definition not included.
Maine and Vermont were not included due to insufficient data.
Source: First American CoreLogic.
22 MassBenchmarks 2009 • volume eleven issue oneF o r e c l o sur e s C a st L o n g S h a d o w A c r o ss N o rt h e a st R e gi o n
stock of good jobs is an essential ingredient for
any long-term solution to the housing crisis.
Anatomy of a Foreclosure Crisis
Local Efforts to Tackle the Crisis
For the Northeast Region to grow, young fami-
Extending credit to almost anyone who wanted to buy a
lies need to be able buy decent housing with
home is one of the primary causes of the current global
manageable property taxes. Several local orga- financial crisis. Scrutinizing the circumstances surrounding
nizations — including the Coalition for a Better a block of foreclosures provides some insight into the cause,
Acre, the Merrimack Valley Housing Partner- the extent, and the consequences of the problem. Lowell,
ship, Community Teamwork, Inc., the Lowell the Commonwealth’s fourth largest city, with a highly diverse
Plan, Enterprise Bank, and Lawrence Commu- population and neighborhoods ranging from inner city to
suburban, provides an instructive example.
nity Works — are hard at work on solutions.
Concerns about the negative impacts of In 2007, there were 283 foreclosures in Lowell (represent-
foreclosures led to the creation of the Lowell ing the latest annualized figures available at press time).
Foreclosure Prevention Taskforce, a group of Purchase mortgages, used by the borrower to fund the
housing stakeholders including local banks, purchase of property (with no down payment in two-thirds
municipal and state officials, nonprofits, and of these cases), accounted for the majority (57 percent)
of the foreclosures. Traditionally, lenders required home-
housing advocates working collaboratively to
buying borrowers to contribute substantial down payments,
address the crisis. This taskforce, a key partner ensuring that the borrowers had a large chunk of their own
in the newly opened Merrimack Valley Fore- money in the deal but also providing an equity cushion that
closure Prevention Center, provides counseling would protect the lender’s position if home values declined.
services and financial intervention packages to The current boom’s propensity for 100 percent financing of
new home purchases eliminated both the lender’s safety
assist local homeowners at risk of foreclosure.
net and the borrower’s motivation for sticking it out when
A big concern is that the foreclosure crisis
times got tough. With today’s precipitous drop in the value
will increase the number of vacant and abandoned of real estate, many new owners have just walked away from
houses in Lowell. Vacant and abandoned build- burdensome loans, leaving lenders with collateral worth far
ings reduce tax revenues while at the same time less than the indebtedness.
increasing expenditures on municipal services to
Refinanced mortgages, taken out by borrowers already
prevent vandalism and arson. In response, the
owning their property as a second or subsequent mort-
Lowell City Council in July 2008 approved a gage to pay off an earlier mortgage and to extract equity
‘Vacant and Foreclosed Property’ ordinance. If a from the home, accounted for the rest (43 percent) of the
property is vacant, owners or agents are required foreclosures. In the typical refinancing, the borrower had
to contract with a local property management bought the property seven years earlier and had refinanced
firm to maintain and secure it. Owners not in three times. The final mortgage amount averaged $75,000
more than the borrower paid for the home in the first place,
compliance will be fined $300 weekly, with any
suggesting that many homeowners were regularly extract-
expenses incurred by the city to secure or main- ing cash from the rising worth of their homes and not just
tain the property to be recovered by placing a seeking lower interest rates.
lien on the property. After the enactment of this
ordinance, a UMass Lowell researcher randomly As bad as the purchase mortgage problem is, the bigger
assessed 60 foreclosed properties and deter- threat comes from the refinancing phenomenon. Millions
of established homeowners with manageable mortgages
mined that 18 buildings were occupied while 42
but slow-growing incomes succumbed to the temptation of
were vacant. Out of these 42 vacant properties, easy cash and turned their homes into ATM machines. The
15 were secured and 27 were unsecured. repeated refinancing liquidated the rapidly rising value of
There are indications that foreclosures are homes to fund lifestyles that income alone could not sustain.
leading to increased homelessness and there is Unfortunately, the refinancing foreclosures seen to date are
just the tip of the iceberg: with indebtedness far in excess
evidence of the adverse effect that foreclosure
of the still-declining value of their homes and the broader
sales are having on neighborhood property val-
economy in crisis, many in the middle class now find them-
ues. In the July issue of the Merrimack Valley selves one missed paycheck away from foreclosure.
Housing Report, Middlesex North Register of
Deeds Richard Howe reported that recent fore- Richard P. Howe Jr. is the Register of Deeds for the
closure sales resulted in a 37 percent decrease in Middlesex North District Registry of Deeds.
property value when compared to the original
price paid by the dispossessed owners.
MassBenchmarks 2009 • volume eleven issue one 23It appears that multi-family housing represents
a disproportional number of foreclosures in Massa-
chusetts. Our research indicates similar findings in
the four largest cities within the Merrimack Valley. Foreclosure Trends Across
As a result, the number of families impacted by fore- the Commonwealth
closures in Massachusetts is larger than the number
of foreclosed properties. In addition, tenants are
being impacted as lenders often evict all residents A Mortgage Bankers Association report released on
after foreclosure proceedings, believing such a move December 5, 2008 finds that at least 10 percent of
homeowners in the United States are behind on their
will expedite the resale of the property.7
mortgage payments or already facing foreclosure.1
Juan Bonilla of Lawrence Community Works
Nationally, 1 in 10 home loans is in delinquency, 1 in
would like to see the Commonwealth place a mora- 20 is seriously delinquent, and 1 in 33 is in foreclosure.
torium on all foreclosures “so we can come up with Although the Massachusetts housing market has not
strategies to help people keep their homes.” He deteriorated as badly as markets in the most dis-
believes that the legislature also needs to come up tressed states (recent reports highlight California and
with ways to keep tenants in their apartments after Florida as well as Nevada, Arizona, Michigan, Rhode
properties are foreclosed: “Lenders are saying they Island, Illinois, Indiana, and Ohio), homeowners in the
Commonwealth are nevertheless still struggling.
are not in the business of being landlords and it is
easier to dispose of these properties when they are
The accompanying map and table provide foreclo-
vacant. If we can keep tenants in their homes, this sure needs scores for zip codes and larger juris-
will help keep neighborhoods stable and prospective dictions in the state, identifying some of the most
buyers will know the property is being maintained.”8 distressed areas in the state relative to home loan
Massachusetts Fifth Congressional District delinquency and foreclosure. These scores were
Congresswoman Niki Tsongas notes: “Cities and developed by the Local Initiatives Support Corpora-
towns across our region have been hit hard by the tion and incorporate measures of subprime lending,
foreclosures, delinquency, and vacancies to help
housing crisis. Vacant properties lower nearby home
state and local officials quickly assess the relative
values, become centers for crime and vagrancy, and
needs of different jurisdictions for neighborhood
increase the demands on local police and fire depart- stabilization funding within each state and to allocate
ments.” She adds: “Congress has moved forward funds accordingly.2
with a number of initiatives to assist home-owners
including the Emergency Economic Stabilization
Act and the Housing and Economic Recovery Act.
Reducing the number of foreclosures and limiting The “needs scores” by which Massachusetts cities and
the decline in property values are essential to stabiliz- towns are ranked in the accompanying map and table
incorporate measures of subprime lending, foreclosures,
ing our economy, keeping people in their home, and
delinquency, and vacancies. The higher the score, the more
recovering the equity so many Americans lost as the
distressed the housing market. The scores are standard-
value of their homes fell.” ized relative to the highest need score, recorded for the
On the bailout plan, Tsongas notes: “Assis- city of Springfield (= 100).
tance to financial institutions should be contingent
on their willingness to increase lending thereby pro-
viding liquidity to the market, including providing
NOTES
assistance to responsible homeowners in danger of
foreclosure.” Although some banks have begun to 1. This information was found in the following press release: “Delinquen-
renegotiate the terms of mortgages and have stopped cies Increase, Foreclosure Starts Flat in Latest MBA National Delinquency
foreclosures, along the lines FDIC chairwoman Sheila Survey.” Mortgage Bankers Association. December 5, 2008. http://www.
Bair proposes, Tsongas wants the Treasury Depart- mbaa.org/NewsandMedia/PressCenter/66626.htm.
ment to “use its leverage and authority to make this
2. The data used in the map and tables were developed by the Local
a more widespread practice.”
Initiatives Support Corporation (LISC) and were found at Housing
According to Frank Carvalho, executive direc-
Policy.org: http://www.housingpolicy.org/forclosure-response.html#zip
tor of the newly formed Merrimack Valley Commu-
nity Development Finance Institution and co-chair
of the Lowell Foreclosure Prevention Task Force:
“The $700 billion bailout is not helping homeown-
24 MassBenchmarks 2009 • volume eleven issue oneF o r e c l o sur e s C a st L o n g S h a d o w A c r o ss N o rt h e a st R e gi o n
Foreclosure Needs Scores by Zip Code, Massachusetts
Lawrence (45.8)
Foreclosure Scores Lynn (29.1)
Fitchburg (31.2)
0 - 9.9 Revere (20.9)
10 - 20 Boston (34.9)
20.1 - 39.9 Mattapan (25.9)
40 - 45.8 Randolph (22.9)
65.4 Brockton (65.4)
100
No Data
Pittsfield (20.1) Springfield (100)
Taunton (20.5)
New Bedford (27.3)
Note: The labels on this map highlight the highest score in each city, rather than all zip codes.
Foreclosure Needs Scores by Community Development Block Grant (CDBG) Jurisdiction, Massachusetts
Top twenty jurisdictions as of October 28, 2008
Intrastate % of All
Estimated Total % of All Loans: % of All Loans:
Foreclosure Loans: 30+ Days
State Number of Loans Subprime In Foreclosure
Needs Score Delinquent
Springfield 100.0 31,182 33.28 15.42 4.16
Brockton 41.5 14,936 32.18 15.51 4.74
Boston 40.3 96,416 10.33 5.77 1.91
Worcester 27.5 32,102 16.85 8.72 3.14
Lawrence 21.2 8,348 27.96 14.79 5.95
Lynn 17.9 15,216 17.77 10.54 4.13
New Bedford 17.5 15,612 17.16 9.56 2.93
Lowell 13.7 16,128 15.76 9.29 3.05
Fall River 13.3 9,887 17.76 10.66 3.47
Fitchburg 11.9 6,321 21.12 12.26 4.31
Chicopee 10.4 9,154 19.31 11.08 2.74
Taunton 8.8 12,034 14.51 8.79 2.69
Pittsfield 7.5 9,519 16.97 8.93 2.08
Plymouth Town 6.9 15,345 9.90 7.79 1.80
Holyoke 6.7 4,772 24.88 10.89 2.61
Haverhill 6.7 13,275 10.91 7.70 2.32
Leominster 5.9 7,689 13.91 8.24 2.24
Malden 4.8 9,250 12.86 6.41 2.84
Barnstable 4.8 11,256 9.54 6.60 2.63
Westfield 4.7 7,459 14.92 7.76 2.31
Source: The Foreclosure Response Project.
For definitions and detailed documentation, see http://www.housingpolicy.org/assets/foreclosure-response/methodology.pdf
MassBenchmarks 2009 • volume eleven issue one 25ers at risk of foreclosure at this point in time. The only way NOTES
these homeowners will receive a direct benefit is if the next
1. The Sun, February 24, 2008.
bailout or stimulus bill provides mechanisms for their mort-
gages to be restructured to more affordable payments.” 2. Yovani Baez interview, September 2008.
3. Jenifer B. McKim, “Mass. Home Prices, Sales Fall Further,” The
In Summary Boston Globe, September 24, 2008, C1; John Fraser, “2008 Foreclo-
What are the long-term implications of the mortgage cri- sures in Lawrence: a 20-Year Snapshot,” Merrimack Valley Housing
Report, September 2008, 2; Richard Howe, “Statistical Analysis of
sis? According to Fred Faust, president of the Edge Group Foreclosures in Lowell, Massachusetts During 2007,” unpublished
Inc., a Lowell-based full service real estate company: “At paper, January, 2008.
least for the time being it will substantially reduce lend-
4. John Fraser, “2008 Foreclosures by Property Type for Haverhill
ing on any development with perceived risk, and almost and Methuen,” Merrimack Valley Housing Report, August 2008, 2.
every development has risks. Furthermore, regulators
have decided to regulate, so under-regulation is followed 5. Rita Savard, “Your House is Worth Less and Your Tax Bill Will
Cost You More,” The Sun, September 28, 2008, 1.
by progressive regulation so we are seeing the pendulum
swing the other way. Rates of lending have slowed and 6. Connie Paige, “Ups, Downs, of Home Ownership,” The Boston
equity demands by lenders have increased substantially. Globe, September 18, 2008, NW2.
While this crisis exists, you have a perfect storm, which 7. Christopher L. Foote, Kristopher Gerardi, Lorenz Goette, and
holds the possibility of a longer recession and slower Paul S. Willen, “Subprime Facts: What (we think) we know about
the subprime crisis and what we don’t,” Public Policy Discussion
recovery. Financial service and construction jobs and all
Paper 08-2, Boston, Mass.: Federal Reserve Bank of Boston, 2008.
real estate transactions will be negatively impacted.” http://www.bos.frb.org/economic/ppdp/2008/ppdp0802.pdf
Frank Carvalho, of the Merrimack Valley Commu-
8. Juan Bonilla interview, September 2008.
nity Development Finance Institution, agrees with Faust
that the present crisis “will slow down all large projects, as 9. Fred Faust interview, September 2008; Frank Carvalho interview,
nothing will be built on speculation, as in the past. It will September 2008.
also increase the cost of larger projects, because less capital
is available for the housing market.”
Faust sees a small silver lining in that growing num-
bers of first-time buyers, attracted to the market by falling
prices, will help reduce inventory and restore some confi-
dence that the housing market will recover. But he poses
a large question as well: “Will we have enough economic
growth to support more positive long-term trends?” Car-
valho sees some positives poking through the wreckage
too. “Long-term, foreclosures will continue to bring
down market value that may help the region keep talent
in the area, such as young professionals, as housing prices
continue to come down,” he suggests.9
However we view it, the Wall Street meltdown will
affect neighborhood development in the Northeast region
for years to come. Perhaps the most heartening prospect
is the resourcefulness of local agencies, organizations, and
city administrations in establishing collaborative ways to
handle the fallout.
The authors are affiliated with the University of Massachusetts Lowell.
David Turcotte is a senior program manager and researcher at the
Center for Family, Work, and Community and co-editor of the
Merrimack Valley Housing Report. Robert Forrant is a professor in
the Department of Regional Economic and Social Development, where
John Fraser and Shuwen Liu are graduate students.
26 MassBenchmarks 2009 • volume eleven issue oneYou can also read
