Minnesota’s housing market continues to show signs of distress on several fronts, according to a new report.
Employment in residential housing dropped below 9,000 monthly for the final quarter of 2010, the lowest fourth-quarter level in 17 years, and high housing inventory continued to impact both the construction industry and home values, according to the latest “2 x 4” report from the Minnesota Housing Partnership (MHP). On average, the report says, 34 percent of homes for sale were foreclosures or short sales.
While homelessness in Hennepin County remained virtually the same, says Chip Halbach, MHP executive director, numbers of homeless youth were on the rise.
“During this recession, a lot more people have lost their homes. Also as a part of that, many more children are homeless. From the reports we get from the Minneapolis and St. Paul school systems, children and youth homelessness has increased 6 percent from this period a year ago.”
Statewide, the foreclosure rate hit a two-year low, but Halbach says that could be a one-quarter anomaly connected to legal issues around the banking industry’s practice of “robo-signing” foreclosure documents.
Another indicator of tough times ahead, Halbach says, is the rapidly declining vacancy rate for rental housing in the Twin Cities, which has dropped to less than 4 percent. He says 5 percent is considered a healthy rental market in terms of balance between renters and available apartments.
“What happens typically in that situation is that rents start to climb, and many families out there are stretched already to pay for their housing costs and price of rent.”
Halbach says the trend downward in vacancies, coupled with increasing rents, is expected to continue for at least a couple of quarters.
He points to one bright note in the report: a continued decline in mortgage delinquencies.
“It’s now been several quarters that the rate has declined, now to about 6 percent of homeowners across the state are 60-some days past due on their mortgage.”
Late last week, Minnesota lawmakers announced plans to cut funding for housing and economic-development programs by about 50 percent. Given what’s happening in the housing market, Halbach questions the wisdom of those cuts.
“You hear the majority leaders talk about their interest in a safety net for Minnesotans. It seems to be a real contradiction in terms of halving the state’s housing budget at a time when so many people are just on the edge or have already lost their homes.”
The “2 x 4” report is online at mhponline.org.