Foreclosure News in the Twin Cities
March was dismal for home sales in the Twin Cities area real estate market - except for when it comes to foreclosures. Sales of homes in foreclosure rose dramatically compared to the same month of 2010.
The number of signed purchase agreements in March was down compared to the year before, mainly because the first time home buyer tax credit was still stimulating the market at the time. There was a big drop-off last month in the number of homebuyers who didn't want a foreclosure or short sale. In fact, sales of foreclosure homes surged about 30%.
Additionally, a large portion of foreclosure home buyers were investors ready with cash. Several years ago, only about 3-7% of home purchases were made with cash. But in February and March of 2011, that number was closer to 25-30%.
"Typically when I purchase homes they're bank-owned foreclosures. They've been neglected in some cases, they were at one point condemned. Many of them need a significant amount of work," said Jennifer Olstad, owner of Tupino, Inc., which stands for "Turning Ugly Properties Into Nice Ones." In the past year, Olstad has purchased five properties with cash and sold three of them to first-time homebuyers.
In the wake of the foreclosure crisis, city officials often prefer that people who buy homes also live in them because the downturn particularly affected rental units. The idea is that owner-occupants have more incentive to keep up the property, but communities do need a variety of housing options. Additionally, "house-flippers" do perform a service to neighborhoods when they take otherwise vacant, blighted properties, beautify them, make repairs and sell them to new owners.
One downside to this picture is that first-time homebuyers can't compete against the investors' cash bids. However, the growing demand from cash buyers is not enough to deplete the Twin Cities real estate market inventory. Supply is still far outweighing demand at the moment. In March, there were about seven and a half months of inventory hanging around the Minneapolis-St. Paul metro area, up 17% from the same time last year.
In related news, citing “critical weaknesses” in foreclosure processes, new regulations have been enacted which will “require major reforms in mortgage servicing operations.” According to the new stipulations, banks will be required to establish compliance programs to ensure their foreclosure operations meet legal requirements. They will also be required to create a single point of contact for customers going through the modification and foreclosure process, and will be prohibited from pursuing a foreclosure once a mortgage is approved for modification. Read more about the new foreclosure regulations at Builder Online.