Minnesota Foreclosures And What They Might Mean

Speculators are moving in to the Minnesota housing market

, looking for bargains at sheriffs auctions of foreclosed properties. The rate of Minnesota foreclosures has been on the rise since well before the current housing crisis began in 2008. 2005 saw the start of the decline and Minnesota foreclosure rates continued to increase through 2008. After 4 years of increases in both the percentage and unit totals, the number of homestead classified residences that went into foreclosure declined 12 percent from approximately 24,800 properties foreclosed in 2008 to 23, 019 foreclosures in 2009.

While this decline is seen by some speculators as an indicator that the time is ripe for getting into the Minnesota residential real estate market, analysts caution that the 2009 decrease in foreclosure rates may be only a temporary aberration. They point out that the state unemployment rate remains at historically high levels. The case against optimism is bolstered by the tremendous efforts put behind stopping the growth of foreclosures in 2009.

Long-term high unemployment in Minnesota means that those who lost their jobs in 2009 may well not find work in 2010. When these homeowners exhaust the benefits they receive from the state unemployment insurance agency. It is low employment levels that have stymied the best efforts of both the state and federal governments to lower the rate of Minnesota foreclosures.

There is a mortgage restructuring program mandated by the feds as part of a number of the bail outs. This program requires many lenders to extend the length of mortgages so as to bring the payments down to a level that doesn't consume more of household income than 30 percent. While this has no doubt saved some residences from foreclosure, it is of no help if the homeowner has become unemployed.

As regards the changes to the Minnesota foreclosure process enacted in the summer of 2009, the ability of homeowners to get 5 month postponement of a forced sale also helped lower the 2009 foreclosure numbers. The ultimate success of this change remains in doubt, however. This is because the data is not yet in on how many homeowners have successfully used the postponement period to resolve their employment and income issues. The legislation only took effect in August and the first round of postponements are only now ending.

The new foreclosure legislation also increased the responsibility of mortgage holders to maintain abandoned properties. These responsibilities include securing the premises, changing the locks, protecting the dwelling from the elements and maintaining the surrounding land in a manner consistent with community standards.

There is some consideration that these new responsibilities have been enough to keep many investors out of either the market for foreclosed homes or out of the home mortgage sector entirely, tightening an already battened-down supply of money.

The newly revised foreclosure process is defended by supporters who point to the 12 percent reduction in the 2009 foreclosures. But we will have to adopt a wait and see stance on the matter. Things will become clearer as the year progresses and the data on the relative success homeowners make of their 5 months starts to come in. The nightmare scenario will be if the extra time fails to assist those who need decent paying full time work.

Analysts of all persuasions are agreed that a full recovery of the Minnesota real estate market cannot occur in the absence of a significant reduction of the states high unemployment. It is difficult to see when this might be. For bargain hunters, there are certainly deals to be under the gavel of sheriffs auctions. But the time is not yet ripe for a return to the house flipping days of yore in the Minnesota foreclosures arena.

by: Brad Johnson.

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