Can national blunders prevent Boston real estate from thriving?

The future of the Massachusetts housing market looks bright, as a new report highlights certain improvements seen in the Bay State over August. According to the Warren Group, lenders completed 566 foreclosures in Massachusetts in August 2012 - the lowest monthly level recorded this year. Furthermore, the August 2012 total was 40 percent lower than what was measured back in August 2011, and last month's reading showed the fewest number of completed foreclosures since February 2011.

In 2012, a total of 5,875 foreclosure deeds have been started - an 8.4 percent year-over-year increase, the source reports.

"Fewer foreclosures were completed in recent months, which may indicate a greater effort from lenders to find loan alternatives," Banker & Tradesman editor Cory S. Hopkins said in a statement. "As banks continue to return to more normal foreclosure procedures and the housing market follows the same path, we are likely to see more good news in coming months."

Nevertheless, the number of foreclosure petitions, the preliminary step in the process, was 1,456 in August 2012, which is 4.2 percent higher than what was recorded in August 2011, according to the industry report. In fact, 12,079 petitions have been filed in 2012 - up 46 percent year-over-year.

However, potential shortfalls in Washington D.C. could prevent the national housing market from blooming. If Congress fails to come to a compromise on the nation's mounting debt, a series of budget cuts and tax hikes will go into effect next year. Economists warn this sort of disaster could send prospective homebuyers running for the hills, and houses for sale in Boston could remain on the market for longer periods of time.

A recent report from Clear Capital argues that even protracted negotiations could be enough to scare buyers away. The report delves deeper into consumer behavior and cites the 14.3 percent drop in sentiment that was seen when lawmakers dragged out the debt ceiling debate in 2011.

While the Bay State has recovered nicely from the housing crisis, buyers remain cautious. With Congressional debates playing a big role in how the future of real estate in the U.S. will unfold, buyers might want to invest in homes with a proven track record of retaining their value. In Boston, neighborhoods like the North End, Back Bay and Beacon Hill are all stable markets, and buyers should consider those areas for their next homes.