Home Prices Continue To Plunge In Twin Cities

MINNEAPOLIS (WCCO) — The latest numbers have the Twin Cities leading the nation in a category nobody wants to win.

Minneapolis posted a 10 percent drop in home prices from this same time last year. That’s the biggest drop in the country.

Experts said we haven’t reached bottom yet and the continued fall of housing values is prompting a surge in rentals.

This latest drop means that average home values are down a staggering 38 percent from what they were at their high point in 2006. And what we are seeing is more people are opting to rent. Just more than half of people living in Minneapolis now rent. The trend isn’t just in the city, it’s also spreading to the suburbs.

Charlie Gholl, his wife and two elementary school-aged kids have been renting just a few blocks from where they used to own a home in south Minneapolis. He said he was worried about the market then, and he is still worried about the market.

He said he has no plans to buy a home anytime soon.

“In hindsight it has been a great decision for us,” Gholl said. “We are in the same schools, we have the same friends and most importantly we are in the same hockey district.”

The Gholl family isn’t alone. The number of people renting and not buying is up in many Twin Cities communities over the past 10 years. Maple Grove has had a 5.6 percent increase, Woodbury is up 4.3 percent and Lakeville, Plymouth and Eden Prarie are all up four percent. Minneapolis is up two percent.

Experts said the bottom of the housing market isn’t here yet.

“We are five to 10 percent more perhaps to get to the bottom. The bottom is always a moving target,” said Professor Tom Musil at the University of St. Thomas.

Musil said the Twin Cities figures on home values appear worse than they are because the glut of foreclosures are driving down the price of the average sale. But the high percentage of foreclosures in every price range is driving prices down further and faster here.

“That is very bad news for the Twin Cities,” said Senator Al Franken.

Franken is proposing federal legislation to help struggling homeowners facing foreclosure.

“I think that will help stem the tide of foreclosures, which will then put a bottom on the market,” Franken said.

Also fueling the drive to renting are tighter standings by banks for getting loans. Some federal regulators are even pushing for a requirement of a 20 percent down payment for a home, higher down payments for loans are already here another factor leading to more renters.

More from Esme Murphy
  • Joe

    Almost ALL home values are under water. If you lose your job, can a bank go after the Minnesota family for the diff? This is what Franken needs to focus on.

    Recourse debt is a debt that is not backed by collateral from the borrower. Also known as a recourse loan, this type of debt allows the lender to collect from the debtor and the debtor’s assets in the case of default as opposed to foreclosing on a particular property or asset as with a home loan or auto loan. Nonpayment of recourse debt allows the lender the right to collect assets or pursue legal action.[1] While mortgages in the US are typically nonrecourse debt, a foreclosure or bankruptcy can trigger the loan to become recourse debt at the request of the lending institution.
    Nonrecourse debt or a nonrecourse loan (unlike lawsuit funding, or lawsuit loans) is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender’s recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the difference between the value of the collateral and the loan value becomes a loss for the lender.[citation needed] Thus, non-recourse debt is typically limited to 50% or 60% loan-to-value ratios, so that the property itself provides “overcollateralization” of the loan. Nonrecourse debt is different from lawsuit funding, or lawsuit loans, where a lawsuit funding company extends a line of credit to a Plaintiff until a suit is concluded, and if that suit is unsuccessful the Plaintiff does not have to pay the funding company back.

    The incentives and motivations for the parties is intermediate between those of a full recourse secured loan and a totally unsecured loan. While the borrower is in first loss position, the lender also assumes significant risk, so the lender must underwrite the loan with much more care than in a full recourse loan. This typically requires that the lender have significant domain expertise and financial modeling expertise.

    Minnesota is a RECOURSE STATE!!

  • Jake

    Gee, THANKS OBAMA, THANKS DAYTON. Well done. Wall Street, the auto companies, the big banks, they are all on the road to recovery. But home values?
    Pfffft…. Let the serfs eat cake, put more people on gov’t supported housing, yeah, THAT’S the ANSWER..

  • Frank

    Funny nobody brings up the impact of continually increasing property tax rates on the home values. As rates increase to pay pensions of public employees (due to agreements made by our inept leadership) then home values have to fall because new buyers can only afford so much in monthly payments. It also drives current home owners away. Should Dayton succeed in increasing our income tax rate, this will further drive people out of state and cause home values to decrease further. We are in a negative feedback loop with Democratic government decisions driving it.

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