Small multifamily building owners in New England–and their renters–are having a harder time staying afloat during the housing crisis than local single-family homeowners.
New England has almost 320,000 two- and three-family homes; it’s one of the region’s charming characteristics.
But lending standards are tougher for multifamily properties–which, along with rising adjustable-rate mortgages (according to Connecticut affiliate NBC 30), means the multifamily sector has been hit hard, according to a recent Associated Press article printed in the Boston Herald.
New England hasn’t had it easy through the housing slump.
- Its economy has struggled, and housing experienced severe declines in states like New Hampshire, where–according to a forecast released Friday by the New England Economic Partnership--housing prices fell 7.8
percent in the first three months of this year, compared to 2007, the Nashua Telegraph reports.
- In addition, 25 percent fewer homes sold in the state.
To make matters worse, it felt in many ways like New England had really just recovered from its prolonged 1990s housing slump and slow economy.
But now, as we’ve previously said, areas like Massachusetts–where more homes went into foreclosure last year than were sold–the housing slump is becoming a bigger problem: especially for the multifamily market.
- Single-family home sales dropped 10 percent last year.
home sales fell 35 percent. Three-family home sales plummeted 43 percent, AP said. (The Globe has a breakdown of southern New England housing numbers here.)
Considering the fact that the state has 220,000 two- and three-unit "triple-deckers," that’s cause for concern for local economies, owners–and renters.
The National Low Income Housing Coalition estimates that at least 45
percent of the housing units entering the last foreclosure stage in Connecticut, Massachusetts, Rhode Island and New Hampshire contain renters, according to NBC 30.
Where will those people go when their building officially changes hands?
New England is in trouble–and it doesn’t look like the region will be out of trouble anytime soon. Just Friday, Boston Federal Reserve Bank president Eric S.
Rosengren said that the area should anticipate high foreclosure levels for years, even if the economy does improve somewhat, the Boston Globe said.
That’s unfortunately based on a study Boston Fed researchers did to compare the current market to the real estate crash of the 1990s. After foreclosures hit a high in 1992, they stayed at high levels for the rest of the decade, the Fed found.
Which could mean that the current rocky housing conditions in New England will be here to stay for four, five, six years–possibly even a decade.
That kind of prolonged trouble could cripple–if not completely destroy–the region’s smaller multifamily property market. Which would really be a shame.
But what can we do? Because losing a resident or hosting a vacant unit for several months can cause serious financial issues for small multifamily building owners, banks view that type of property as a greater risk–and that’s somewhat fair.
But until lenders relax their rules or someone steps in to help those owners refi out of their rising ARMs, the foreclosures are likely to continue.
What would you suggest the region do to curb its multifamily foreclosures?