WOONSOCKET – Northern Rhode Island’s foreclosure problem appears to be on the mend, but it’s improving at a significantly slower pace than other regions of the state, a report released today says.
HousingWorksRI said foreclosure deeds statewide fell 26.5 percent during the first quarter of the year compared to the same period last year. Although foreclosures were down sharply in Central Falls, Woonsocket, and Pawtucket, each of those communities still has concentrations of foreclosures above the statewide average of .2 percent of the mortgaged housing stock, ranking them first, fourth and sixth-worst, respectively.
Foreclosures fell in 25 municipalities statewide and rose in seven others, including Glocester, Burrillville, Smithfield and Lincoln, the report said. The pace was unchanged in eight other communities.
A total of 369 foreclosure deeds were filed statewide during the first quarter, including seven in Central Falls, 19 in Woonsocket and 29 in Pawtucket.
Jessica Cigna, policy analyst for HousingWorksRI, said the figures are generally good news for the housing market and the broader economy. Even in some communities that registered an increase in foreclosures, the trend can be misleading because the overall pool of affected properties is so small.
The report, for example, says Lincoln experienced a 100 percent increase because four foreclosure deeds were filed during the first quarter or 2013 compared to two during the same period in 2012.
“The good news is we are seeing a drawback in the overall number of foreclosures,” she said. “We think that’s a hopeful sign for the economy.”
But Cigna said the lingering affects of the foreclosure crisis continues to hurt property owners in Rhode Island more than anywhere else in the region.
While the pace of foreclosures is receding, many homeowners are still struggling with “negative equity” in their homes. In other words, the debt they owe on their mortgages is greater than the appraised worth of their homes, a situation real estate agents refer to as being “underwater” or “upside down.”
Cigna said 23.4 percent of the state’s homeowners were underwater during the fourth quarter of 2012, the highest in New England and tenth in the nation.
From January 2010 to the second quarter of 2012, the share of negative equity mortgages in the state was lower than the national level. “Beginning in the third quarter of 2012, the share of distressed mortgages in Rhode Island outpaced the national level,” the report says.
“The bad news,” Cigna said, “is that the state continues to see the lasting effects of foreclosures on the housing market.”
Although homeowners stuck in a negative equity situation might be able to make the payments on their mortgages, they have less economic mobility than other consumers. Typically, they have problems refinancing their homes or gaining access to home equity lines of credit.
The problem isn’t just that underwater property owners have been shut out of the economic recovery. With nearly a quarter of the state’s homeowners underwater, the problem is widespread enough to represent a drain on the economy because affected individuals are probably not investing in long-term capital improvements like new roofs, siding and other work that keeps construction tradesmen busy.
HousingWorksRI, a non-profit coalition of builders, lenders and real estate developers, says the long-term solution is for the state to continue promoting affordable housing. The agency says the bust of the housing bubble in 2008 would have been far less destabilizing to the state’s economy if there had been an adequate supply of affordable housing before the crisis.
Follow Russ Olivo on Twitter @russolivo