Tuesday, April 19, 2005

Home buyer worry in two areas

By Scott Van Voorhis

If you're wondering what it will be like if the real estate bubble bursts, ask some homeowners in Dorchester and Roxbury.
The gas is running out of the recent real estate run-up in both neighborhoods, according to local housing researcher John Anderson.
Dorchester and Roxbury homeowners defaulting on mortgages rose 35 percent over the past year, said Anderson, of The Real Estate Analyst. And Dorchester single-family and condo prices are falling after record highs last year.
The jury is still out whether the bad news is just local - or a warning of a larger Boston area decline.
But a cooling off could hit Dorchester and Roxbury particularly hard, thanks to a growing number of high-interest, subprime loans.
``There is a whole confluence of factors,'' said Anderson, a longtime Dorchester homeowner. ``We've hit the wall.''
The numbers tell the story, with 65 homeowners facing foreclosure in Dorchester and Roxbury between April 2004 and April 2005, Anderson reports. That's up from 48 defaults the year before.
Dorchester single-family home prices dropped during the same period to $320,000 from $370,000, while condo prices slid to $245,000 from $265,000, Anderson said.
As the number of homeowners in trouble has risen, Anderson has seen an explosion in lending by high-interest-rate lenders.
It is a problem that James Campen, an economist from the University of Massachusetts at Boston, documented in a recent study that found a 60 percent rise in so-called subprime lending in Boston neighborhoods.
Other problem signs, according to Anderson, include rising interest rates and a proliferation of for-rent signs in two-or-three-family homes. Such small multifamilies have been a favorite of first-time buyers trying to break into the market.
``To use a cliche, it's the perfect storm. All the elements are coming together,'' Anderson said.
Still, Karl Case, a Wellesley College housing economist, was cautious about forecasting a price plunge based on Anderson's findings.
``I don't think what is likely to happen is a big bust in price,'' he said.