Minneapolis Area Foreclosures Continue Decline

It is common knowledge the foreclosure epidemic has contributed to a sharp decline in Minneapolis MN real estate market values.  There are two influential factors that are slowing the number of delinquent and foreclosure properties affecting the market.  While interviewing a local non-profit dealing with much of the Minneapolis Minnesota real estate foreclosure problem, the amount of foreclosures they are handling has declined fifty percent from the peak levels of summer 2008. 

There are two primary reasons for this.  First, the Minneapolis Area was not as dramatically affected by foreclosures as other metro areas in the country.  Southern California, Florida, Las Vegas, and Phoenix are still challenged by a full pipeline of borrowers unable to afford their mortgages.  Second, The Homeowner Stability Initiative will enable as many as 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance their mortgages through those institutions.

Under current rules, refinancing is not an option for most homeowners who owe more than 80 percent of the value of their homes.  An additional 3 million to 4 million homeowners will be able to avoid foreclosure through a new $75 billion mortgage modification program. The Homeowner Stability Initiative will be available to homeowners who are at imminent risk of default, even if they are now current on their payments.

Lenders will be responsible for reducing interest rates on these loans so the monthly payment would be no more than 38 percent of the homeowner’s income. Government funds would match further reductions in interest rates to bring the payment down to 31 percent of income.

The federal government programs are in the early stages of implementation.  Even without them, foreclosures in our area will continue to decline.  Foreclosure issues going forward will largely be due to job losses and will affect dramatically fewer people than the relaxed lending standards of the early and middle part of this decade.

I predict with current trends the number of foreclosures in our market will continue to dissipate.  As a result Minneapolis Minnesota real estate values will stabilize in the next 12 to 18 months.  The opportunity to buy, and move up has never been better.  It is now obvious that these optimal conditions will not last much longer.

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