Are speculators about to move into the Minnesota real estate market is an excellent question. There are reasons to answer it either positively or negatively. That are bargains to be had is indisputable, but it is unlikely the market will reward speculators fast enough for hard core house flippers. Nevertheless, a 12 percent reduction in the total number of residential properties that went to auction from 2008 to 2009 is worth thinking about. It may be that the upward trend of Minnesota foreclosures is finally over.

The 2009 reduction of nearly 1800 units from sheriffs auctions maybe a hopeful sign. On the other hand, there is some reason to believe the state foreclosure figure will resume their upward trend in 2010. Perhaps the strongest argument for pessimism can be found in the number of Minnesotans that are currently unemployed. According to the president of the Minneapolis offices of the Federal Reserve, unemployment in the state will remain at 9 percent for most of 2010 and will not drop to below 8 percent through 2011.

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.

A mandated restructuring program for residential mortgages was included in some of the bail outs that the federal government extended to financial institutions. It requires certain lenders to extend mortgages in such a way as to drop monthly payments. The target figure is to get mortgage payments down to the 30 percent of income range. The problem is that the program does not apply if the homeowner is unemployed.

Under Minnesota’s amended foreclosure rules, homeowners who have been served with a forced sale date have the option of requesting a postponement in the sale of five months. While this certainly saved some dwellings, it was not as successful as had been hoped due to the ongoing lack of decent paying employment.

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 of all persuasions are agreed that a full recovery of the Minnesota real estate market cannot occur in the absence of a significant reduction of the states high unemployment. It is difficult to see when this might be. For bargain hunters, there are certainly deals to be under the gavel of sheriffs auctions. But the time is not yet ripe for a return to the house flipping days of yore in the Minnesota foreclosures arena.

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