Another irresponsible article in the Boston Globe. In this one (also by Kimberly Blanton, who apparently has a chip on her shoulder about something), high housing prices, a sluggish economy, and new mortgage programs are the culprits behind a large increase in the number of foreclosures, last year.
However, nowhere does she report the most crucial data – yes, foreclosures in numbers increased, but did foreclosures in percentage increase? If the number of mortgage loans taken out last year increased by the same number as did the foreclosures, then you would expect more foreclosures.
In fact, the total number of condo sales in Massachusetts, in 2003, according to MLS, was 17,651. In 2004, it was 22,138. That is a 25.4% increase. (Single-family home sales increased a much-more modest 11.1%, from 45,000 to around 50,000.) Foreclosures increased a similar 27.8% in that time period, according to the article.
In Suffolk County (which is Boston, Chelsea, Revere and Winthrop, I believe), condo sales increased from 3,125 to 4,592, more than 46%. Foreclosures increased 49% between last year and this year, according to the article.
Now, of course, I realize, people going into foreclosure this year may have bought their homes in the past year, but very well could have bought them two, five, ten or twenty years ago. But, I think it is still a good comparison to use.
Ms. Blanton has taken selective data in order to make her hypothesis work.
And, like her last story, she ends up having to interview people who don’t really fit into her theme. In this article, she starts by talking about how the high cost of housing and a sluggish economy are why people are going into foreclosure. Yet, she then uses as an example a couple who 1) bought a pizza parlor with their home equity and then 2) kept pulling out cash over and over to pay for car loans and credit cards, in some sort of madness.
Those aren’t problems we all have, and they have nothing to do with her main idea.
Read, but be skeptical.
By Kimberly Blanton, Boston Globe
The combination of high housing prices, low interest rates, a sluggish job market, and new mortgage products that allow borrowers to stretch their finances to pay for their homes has contributed to a nearly 28 percent surge this year in foreclosure filings across Massachusetts.
The spike in homeowners being taken to court for falling behind in their mortgage payments is one of the results of the 50 percent increase in Massachusetts home prices between 2000 and 2003 — a bigger rise than in any other state. In 2004, the median sales price for a single-family home in Boston was $387,400, more than double the US median.
Because of high housing prices, many first-time homebuyers have been using new, risky mortgage products that hold down costs in the early years of a loan, but they can face difficulties if payments rise later. In addition, people who already own homes have been tapping into rising property values to borrow money at historically low interest rates for college tuition, home improvements, credit-card debt, or other financial needs.
Across the country, mortgage debt is growing dramatically, according to Federal Reserve data. Americans took on $904 billion in mortgage debt last year, $276 billion more than two years ago. Nationally, the number of homeowners who have fallen behind in their mortgage payments and face potential foreclosure fell slightly during the first quarter of 2005.
But in Massachusetts, the number of foreclosure filings rose 27.8 percent, to 3,740, in the first four months of the year, compared to 2,926 in the same period last year. The largest jump, 49.8 percent, to 367 foreclosures, took place in Suffolk County. In Essex County, which includes Lawrence, Salem, Gloucester, and Newburyport, foreclosure filings rose 40.6 percent, to 440. The data was compiled by ForeclosuresMass Corp., a company that collects information from the state’s Land Court, where most of the foreclosure actions against mortgage holders are filed by lenders.
Complete article: Foreclosure filings jump in Mass. as home values soar
Revision: Yes, as someone commented, it’s kind of irrelevant data that purchases increased in one year by the same percentages as foreclosures. You can’t really compare the two. Foreclosures aren’t related, at all. I’m not going to change the post, though.