Minnesota

Troubled by rising foreclosures and a growing inventory of homes, Minnesota is in a severe housing recession. The credit crunch is taking its toll on the state.

The Twin Cities, which includes Minneapolis and St. Paul, has been hard hit by the mortgage crisis and it doesn’t look as though it’s going away any time soon. Home values are dropping at nearly as fast a clip in the majority of the states markets as they appreciated. New building starts are down and tens of thousands of home owners find themselves in the straits of possible foreclosure.

When the housing bubble burst in Minnesota many home owners saw the equity in their homes evaporate quickly. Many have been taken advantage of by cold-calling mortgage companies and brokers, especially in the rural areas to refinance their homes and other properties. Foreclosures have more than doubled.

In Minneapolis home prices are dropping and will remain falling through 2008. That isn’t to say it’s a bad time to buy a house in Minnesota. It’s the best buyers market in years for those with a good down payment and good credit. Deals are being made for the few who do buy in a down market, better than in many years.

City	Forecast
Minneapolis	− 8.1%
St. Paul	− 7.3%
Bloomington	− 5.3%
Duluth	− 3.8%
Rochester	− 6.7%

Housing Predictor forecasts Minneapolis will see declining home sales through 2008 on deflation of 8.1%. In nearby St. Paul it may be slightly better in terms of sales, mainly because of lower average prices in many neighborhoods. But St. Paul will deflate a forecast 7.3% by year’s end in average values.

In the suburbs outside of the Twin Cities, Bloomington has seen its population grow by a third since 2000. Despite a slower housing market the area should continue to see an upward trend in more residents over the remainder of the decade. However, increasing inventory is triggering downward pressure on prices, and Bloomington will see lower housing values by 5.3% by year’s end.

Rising above Lake Superior, the largest freshwater lake in the world, Duluth is the fourth largest city in Minnesota. Downtown redevelopment spans a Lake Walk and Aerial Lift Bridge with a nearby Aquarium. Home prices are some of the lowest in the state with an average hovering around $80,000.

Foreclosures are inching upward, but shouldn’t exert much downward pressure on the market through 2008. Housing Predictor forecasts only a slight deflation in Duluth housing values for the year at 3.8%.

The real estate market is a bust in Rochester, where sales have been slow for nearly a year, and home prices are declining. There are few buyers in the market place, waiting for the economy to improve. Values will see an average decline forecast in Rochester of 6.7% for the year.