The True Story Behind the New Hampshire Foreclosure Market

One may think after reading the newspapers or turning to your favorite national news syndication that the housing market is like the cowardly lion walking through Oz, frightened of his own shadow. However in looking through the numbers in New Hampshire we have found things not to be as alarming as one may think. To begin with, lets look at how most national models look at foreclosure data. Most of them source foreclosures as the number of foreclosure notices  per total housing units. In August of this year RealtyTrac reported that 1 in every 570 housing units had a foreclosure filing.  This, as you will see, is a flawed argument.

To begin with, a notice does not a foreclosure make. While many homes are given notice that they are going to be foreclosed upon, the reality is that in New Hampshire over the past 24 months less than 60% of those homes actaally get foreclosed upon. While notices may be a harbinger of what is to come, it must be discounted down because some homes end up selling short, or the lender and home owner work something out. In short we believe  the total number of properties actually foreclosed upon is what should be tracked.

The second misdirection that the national media uses is that they use the total housing inventory for a state, rather than the number of total deed transfers. We feel it is better to look at what has been foreclosed upon against the total number of transfers, rather than the housing inventory. While the numbers may sound worse when done in this fashion, we think it is a more fair indicator because it pegs against what else is going on in the market such as normal warranty and quitclaim deed transfers.

Consider the chart below. The red idicates the actual number of foreclosres in the state of  New Hampshire (not notices). While the blue indicates the percentage of foreclosure deed transfers divided by the total number of transfers (Quitclaim, Warranty and Foreclosure) over that same period in the state.

You can tell that over the last few years The Granite State has remained fairly flat on both foreclosures and foreclosure percentage. There is seasonal fluctuation but within reason. One can even note that in the last four quarters, with the exception of the 2^nd quarter of this year, there is a drop in foreclosures that goes beyond seasonality.   For points of reference in 2010 there were 4,007 total foreclosures in the state with a rate of 16.26%. In the last large real estate recession in 1991, we had 5,244 foreclosures and a rate of 19.68%.

Times are tough out there, don’t get us wrong. Foreclosures are not going away tomorrow. However New Hampshire is doing much better than the rest of the nation and we even see trends for improvement. So don’t always believe the man behind the curtain, sometimes the Wizard is just not what you expect him to be.