Housing, mortgage mess: Version 2011

MinnEcon readers know we've been in an extended malaise in the Twin Cities housing market and that it's a long way back to normal.

Still, if you were looking for signs Minnesota housing might finally be on the upswing, you would have been pretty bummed lately.

The Minneapolis Area Association of Realtors reported foreclosures and short sales drove median Twin Cities home sale prices down nearly 11 percent in January compared to January 2010. Sellers were getting only 88 percent of the original list price, worse than the crisis years of 2008, 2009 and 2010.

At roughly the same time, the Minnesota Home Ownership Center released a report showing foreclosure sales rising significantly last year compared to 2009. Some 26,000 homes were sold at sheriff sale in 2010, meaning nearly 25,000 Minnesotans lost their homes, the second highest year on record, according to the home ownership center.

Click on the chart for a larger view.

Here's a breakdown by county of homes foreclosed during 2010. Click on the map below for a larger view (use your page down key to move up and down the state).

It really shows the hit the Twin Cities northern suburbs and exurbs continue to absorb.

We're particularly familiar with Isanti County, the focus of a terrific package of MPR stories last fall. Reporter Laurie Stern wrote:

The foreclosure rate in Isanti County is the second highest in the state. In a county where less than 40,000 people live, more than 588 families have lost their homes to foreclosure since January 2009.

The recession's disproportionate impact there can be explained by two things: New homes bought with treacherous mortgages at the height of the boom; and the high proportion of workers who used to commute to the Twin Cities for work, and have lost their jobs.

Isanti also spent 2010 among the counties with the highest foreclosure rate, adding another 349.

Bottom line: The Minneapolis Realtors thought the market was on "recovery road" going into 2010. It wasn't. In 2011, there are still plenty of problems with the current housing market and worries about mortgage problems to come.

The Minnesota Housing Finance Agency has kept close watch on the number of non-prime (read: possibly shaky) adjustable rate mortgages that have yet to reset their interest rates. Here's a heat map by zip code.

An index score of 200 means the zip code's rate is twice the state rate.

The problem, the housing agency notes, is that "with a high proportion of borrowers currently owing more on their mortgages than their homes are worth, some borrowers will be unable to refinance out of the ARMs."

So you can't get the current low rate that might make the difference between keeping and losing your home because the value of the home has fallen so far.

This current mess won't be as huge as the first round -- but it will continue to hurt, especially in the northern exurbs and central Minnesota.

Data collected by the Federal Reserve Bank of New York show some of those counties with some of the highest mortgage delinquency rates (90-plus days behind) in the Upper Midwest.

That includes Mille Lacs where 7 percent of all mortgages were delinquent as of October and, yes, Isanti, where 7.3 percent remain delinquent.

Here's another way to look at foreclosure problems in Minnesota and the nation from the terrific Patchwork Nation blog.

Dante Chinni of Patchwork Nation also notes that mortgage problems we thought might be behind us have simply been delayed. He writes:

Nationally, the firm RealtyTrac reports foreclosures were essentially flat in January compared with December. But the caveat this time is a big one -- the numbers are flat because there is a raft of foreclosures being held back due to the robo-signing problem from last year.

By the end of the quarter, says RealtyTrac's Rick Sharga, foreclosures will probably be up dramatically.

Any bright spots? Yes. The median sale price for traditional, non-distressed Twin Cities homes ticked up 1.9 percent in January compared to last year, the Minneapolis Realtors reported.

Rising employment, eventually, will make things better. People with jobs typically keep their mortgages current and don't end up in foreclosure. But until that happens, we won't see normal in housing or mortgages.

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