"Mortgage foreclosures on the rise," "Nonperforming assets cluttering up loan portfolios," "Discount auctions of
REO property ...... That's the general tone of the real estate finance news from New England.
But don't be quick to think this is a repeat of the Southwest situation. Finan- cial analysts surveyed by ABA Banking Journal say conditions in New England
are bad, but not that bad.
Some of the symptoms seem similar, however-overbuilding for one. "Real estate developers put a glut of properties on the market," says James E. Moynihan, Jr., bank analyst at Advest Inc. of Boston, "and they don't have the population growth to sustain the ongoing sales of these properties."
Virginia A. Adair regional banking analyst at Drexel Burnham Lambert Inc., New York, notes that while a lot of the overbuilding was financed by commercial banks, much of the blame could also be placed on thrifts. "Many converted from mutual to stock ownership, " she says. "They had a ton of capital and didn't know what to do with it. So they went and built condos. "
Adair adds that the softening of the region's economy, especially the high technology and financial services industries, pulled the economic underpinnings out from the housing market. Further, the lack of affordable housing and the glut of expensive condominiums did little to attract potential residents to the area.
However, the financial analysts surveyed stress that the New England economy on the whole is stable.
"The underlying economy remains pretty healthy in the sense that unemployment remains low," says Don Kauth, bank analyst at First Albany Corp., Albany, N.Y. He notes, though, that developers and banks always assumed that "the high economic growth that occurred since the mid-1980s was going to continue. Now that the economy is not growing as fast as it was, the overbuilding has become evident. " Auctions galore. One of the emerging
trends among banks in this area is foreclosure auctions. Advest's Moynihan reports there were about 250 foreclosure auctions in New England in 1987, about 500 in 1988, and more than 700 during the first seven months of 1989. Moynihan traces this trend to lenders that were "too free with their money," and to builders and developers who "got into ill-conceived projects. " A recent study from the Mortgage Bankers Association of America found that the two states with the greatest increases in conventional mortgage foreclosures were in New England. New Hampshire posted a foreclosed mortgage rate of 2.41% on all conventional mortgages during the first quarter of 1989, up from 0.05% in the same period a year before. In second place was Massachusetts, with a foreclosed rate of 0.49% during the first quarter of 1989, up from 0. …