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.

The mortgage restructuring efforts had the goal of lowering monthly payments for homeowners to no more than 30 percent of household income. While this was successful where there was an income, it was frequently only a temporary stop gap. Homeowners who had gotten behind in their payments due to losing their jobs and then failed to find new work before running out of unemployment benefits found themselves unable to afford even the restructured payment scheme.

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.

Supporters of the newly revised process defend the amendments, pointing to the 12 percent reduction 2009 foreclosures. But they, like all of us, have no choice but to wait for the date to come in on how much difference the five month grace period will make. As these result come in over the course of this year we will be better able to determine whether an extra 150 days actually changes the 5 year trend in Minnesota foreclosures. If the additional time does not assist homeowners in finding good paying employment, the question will become, what do we do now.

Analysts are agreed that recovery for residential real estate in Minnesota real estate will not take place until there is a substantial improvement in the unemployment picture. When and if that occurs is anyone’s guess. There are certainly deals to be had at Minnesota foreclosures auctions. But it is clear that the house flipping days of the past have yet to appear on the horizon.

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