Minnesota Property Markets Stabilize in the Face of More to Come ForeclosureConnections

Minnesota Property Markets Stabilize in the Face of More to Come ForeclosureConnections

Property supply-demand balance has settled in Minnesota

But foreclosures and pre-foreclosures are up again year on year

Is time to batten down the hatches, and ride out the second storm?

The Minnesota housing market is a bit like the traditional curate's egg good in parts, but bad otherwise. Like an exhausted climber half-way up a hill, it is staggering as if steeper slopes lie ahead.

On the positive side, supply and demand for accommodation is settling down in the Minnesota metro areas. On the negative side, recent data suggests that a storm is brewing further on. The latest concerns have been raised, not for the first time, by a Twin Cities research group that now reports sharper foreclosure increase rates between the first quarters of 2009 and 2010.

After initially advising a higher rate of increase following double counting in Dakota, the final data indicates more than 6,700 foreclosures in Minnesota during the first quarter of 2010 alone, which is a worrying increase of 28% over the previous year. Current thinking on local markets centers on the idea that this is caused by the wave spreading from metro and inner urban areas where the problem was mainly driven by poor greedy lending policies and bad borrower stewardship to wider geographical areas hit by plummeting unemployment.

A further concern is that pre-foreclosure notices, which are the initial warning shots of foreclosures on the horizon, were also up between the two periods under review, and by a disturbing 20%. A spokesman from the Minnesota Home Ownership Center, a not-for-profit group that advises householders who could be losing their homes soon, told me that, from where he sat, the trend upwards was more in sub-urban and ex-urban areas, than in the already deeply troubled inner-metro areas.

"We are seeing the number of notices trending upward in the suburban and exurban areas," he added. "All of the sub-urban Counties are trending upward for 2010, and are already ahead of where they were during the same time period last year."

On a more positive note, analysts generally believe that Minnesota is better positioned to handle a fresh foreclosure wave this time. That's because the warning signs have been around for a while now, and everybody is better prepared. Sheriff sales venues have been streamlined, and both borrowers and lenders know the rules a great deal better. Moreover, work already in progress at banks will provide a temporary buffer that should prevent a sudden surge in market panic.

This does not, however, mean that the fresh wave won't push the market back again and delay recovery. It's more like the case of an athlete who breaks the same limb a second time, and knows better how to cope with the effects.

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