The Role of Investors in Acquiring Foreclosed Properties in Boston

Chris Herbert, Lauren Lambie-Hanson, Irene Lew, Rocio Sanchez-Moyano

W13-6: As the housing bust accelerated in 2008, concerns mounted about the impact of rising foreclosure levels on low-income and minority communities where nonprime lending had been concentrated in the years leading up to the crash. With demand from owner-occupants in these communities plummeting in tandem with rising unemployment and falling house prices, it was expected that rising foreclosures would find few buyers. However, somewhat unexpectedly, in recent years private investors have emerged in markets across the country to play a significant role in acquiring and repositioning foreclosed properties. Yet, while the prominence of the investor presence has received substantial attention, there has been little systematic assessment about the scale of investor activity, who the investors are, and what they do with the properties they acquire. This study aims to investigate these questions in one market area as a means to shed light on how the activities of investors are likely to affect the housing market in these communities. This report focuses specifically on investor activity in the city of Boston and other jurisdictions in Suffolk County, Massachusetts.

The study relies on two methods for addressing these questions. First, we analyze locally available data on foreclosures in Suffolk County over the period from 2007 into 2012 to provide a quantitative assessment of investor activity. Second, we conducted interviews with market participants in Boston, including government officials, staff from nonprofit organizations, real estate brokers, lenders, and investors themselves to paint a portrait of investors and their activities. The study is best described as exploratory, as the number of interviews conducted was limited and included only a small number of investors. However, the results do provide some indication of the characteristics, motivations, and activities of investors to help inform our understanding of how investors are likely to affect local markets.