Foreclosure activity in Boston plunged dramatically in 2013, falling to the lowest level in a decade as the local economy strengthened and housing prices rebounded.
Lenders initiated 230 foreclosure petitions last year, down from 890 in 2012 and the fewest in Boston since 2003, according to city officials. Lenders completed fewer than 100 foreclosures last year. At the height of the housing crisis in 2008, lenders seized more than 1,200 Boston properties.
“I think the worst is over,” said Sheila A. Dillon, director of the city’s Department of Neighborhood Development. “But I don’t think we can let our guard down.”
The sharp decline of foreclosures in Boston mirrors trends statewide and nationally. Through September, the number of foreclosures in Massachusetts fell nearly 70 percent compared to the same nine-month period in 2012, to about 4,200 from nearly 14,000, according to the Warren Group, a Boston real estate tracking firm.
“The numbers are down, which is promising,” said Tim Davis, an independent consultant who monitors foreclosures for the Massachusetts Housing Partnership, an affordable housing nonprofit.
The improving housing market has played an important part in ending the foreclosure crisis. As values increase, distressed homeowners are able to sell their properties at prices that cover their mortgages and avoid the foreclosure process.
For example, home values in the Boston area in October increased 8.6 percent from the previous year, according to the S&P/Case-Shiller Home Price Indices, released Tuesday. The index tracks repeat home sales around the United States and is largely considered one of the best markers of the health of the housing market.
In Boston, the median price for a home is $426,000, up 11 percent from $383,000, according to the city data.
But some neighborhoods are still experiencing a hangover from the housing bust, Davis said. Home prices in neighborhoods such as Dorchester, Mattapan, Hyde Park, and Roxbury haven’t recovered as robustly, and foreclosure deeds and petitions continue to be concentrated in those communities.
Foreclosure activity may also increase in the new year, Davis said.
Banks had held off taking back homes as states and the federal government changed regulations for the foreclosure process. In Massachusetts, those rules require lenders to notify homeowners that they have a right to seek a loan modification before losing their home.
Lenders are being more diligent with their paperwork, which has also slowed the foreclosure process, Davis said.
But several large banks have started to increase foreclosures, he said, although it is nowhere near the pace that followed the housing bust. In addition, Davis said, the improving economy and rising home prices should mean that the market can absorb the foreclosures so homes don’t sit empty, blighting neighborhoods.