Minneapolis Minnesota Real Estate Blog

Foreclosures have been a hot topic in Minneapolis Minnesota real estate since 2006 when the housing market peaked.  For the past two years, the news has been packed with negative stories about the housing situation in America.  Most people are aware of the situation we are in, but not a lot know how we got into this major mess.   

The first reason is that, as home prices inflated, people began to refinance their homes.  They then used their homes as if they were ATM’s and withdrew hundreds of thousands of dollars from their home’s alleged worth.  Much of this was done using adjustable rate mortgages and teaser rate loans.  Many homeowner also believed that their homes would continue to appreciate and that they could then refinance again and get even more money out of it.  However, in late 2006, home prices stopped appreciating and the buying frenzy was over!  Housing inventories began to increase while prices began to drop.  To compound the problem, many of those who bought or refinanced had interest rate adjustments on their homes and this lead to increased payments they could not make. 

The second biggest problem was the investors who sprung up all over the country.  Due to the dramatic increase in home values in Arizona, California, Florida and Nevada, investors saw a chance to make a quick buck in the real estate market by flipping homes.  Properties were on the market for a few hours before being bought up and, in some cases, investors were knocking on doors of homes that weren’t even for sale and making offers.  Talk about fuel for the inflation of the housing bubble!

The third reason that got us into the foreclosure crisis is still up for debate.  Some people argue that lenders played a big role in the problem As a close friend said to me, there are three essentials to life:  food, water, and someone to blame.  The homebuyer is ultimately responsible for what he/she borrows, not the lender. The blame for these ridiculously high mortgages, in the end, is the responsibility and problem of the buyer who has borrowed unrealistically, lied about their income, or did not read their mortgage terms to fully understand what they were undertaking.

Even though the media likes to focus their energy on talking about how dismal everything is, including the housing market, the housing crisis is coming to an end. 

Now for the good news and the improving situation!  Currently we are seeing declines or stabilization of foreclosure rates in many regions.  Furthermore, housing inventories are beginning to decline while median prices level off.  In many regions it is now cheaper to buy a home than it is to rent, and interest rates are at an all time low.  Currently homes are undervalued, and with homeownership being cheaper than renting in many areas, markets are beginning to turn.  Many of our clients who are real estate professionals have commented on a dramatic increase in buyer activity in the past 30 days. 

However, continued dismal news constantly being fed through the media may be hindering things.  And that brings me to the final point.  Until the unemployment situation can be improved in this country, there will be foreclosures.  Actually, unemployment is not mentioned in this article because we are focusing specifically on the "housing bubble" which was an over-inflation of real estate based on the various factors noted above.  The unemployment issue came after the housing bubble burst and is, therefore, a separate matter for another article.  So, stay tuned!

P.s. For instant access and unlimited free Minneapolis MN home search including foreclosures complete the form below to begin your search now!