Report: With foreclosures up, recovery still eludes housing

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Graph created by Haley Luckeroth

Minnesota logged more than 6,700 foreclosures during the first three months of 2010, the highest quarterly number posted in a year and a half, the Minnesota Housing Partnership said Monday.

That’s one key indicator why Minnesota’s housing market has yet to make an economic rebound, the St. Paul-based nonprofit organization said in its latest “2 x 4” Report.

The state’s 6,700 foreclosures represented a big increase from the 5,157 foreclosures posted during the same quarter of 2009. And pre-foreclosure notices sent to the Minnesota Home Ownership Center this quarter rose 11 percent, from 16,600 in the fourth quarter of 2009 to 18,412 for the first quarter of 2010, the highest number since data collection began a year ago.

The Partnership attributed that rise in pre-foreclosure notices to high unemployment and “postponement of foreclosure proceedings by lenders during the holiday season of 2009.

“This quarter, the “2 x 4’ report suggests that recovery is still elusive for the housing market,” the Partnership said.

Pat Paulson, president-elect of the Minneapolis Area Realtors Association, wasn’t surprised by the Partnership’s report. But he also insisted that some recovery is starting to occur in the housing market with the imbalance in supply and demand for homes evening out, and home prices starting to stabilize.

Nevertheless, a recovery in home prices could be some time down the road, Paulson said. For example, sheriff’s auction sales in Hennepin, Anoka and Dakota counties are up slightly from a year ago but down from peak levels of two or three years ago, he said.

Meanwhile, the Partnership said other negative tidbits of news are:

• Employment in housing construction was down for the quarter. Jobs in residential housing construction fell to an average 8,800 jobs per month in the first quar­ter, a 13-year low.

• ”The supply of homes for sale rose to 7.2 months by the end of the quarter, a level likely to place downward pressure on prices. Of homes for sale this quarter, 28 percent were foreclosures or short sales. Three years ago only 8 percent of the inventory consisted of such homes.”

• Homelessness remains an ongoing problem. Hennepin County family homelessness fell 2 percent this quarter, but remains 48 percent higher than in the first quarter of 2007. The number of children identified as homeless by St. Paul and Minneapolis schools this school year increased 6 percent.

On a brighter note, the rate of primary mortgages more than 60 days delinquent fell slightly to 7.7 percent in the first quarter.

“This slight fall reversed the long trend towards higher mortgage delinquencies that began with the onset of the mortgage meltdown in the mid 2000s,” the Partnership said. Still, the delinquency rate remains high, reflecting an extended period of high unemployment on top of housing market deflation, the report noted.

Another encouraging note was rental vacancy rates fell to 6.2 percent during the first quarter of 2010, the first drop in a year and a half, the Partnership said. Still, that rate was higher than 5 percent vacancy rate considered to be a balanced figure.

The latest “2 x 4” report begins the Housing Partnership’s second year of tracking key housing indicators including home ownership, rental market, homelessness and the housing industry.