HomeMy WebLinkAbout07-27-09Memorandum
City of Lakeville
Community and Economic Development
To: Economic Development Commission
From: David L. Olson, Community and Economic Development Director
Copy: Steve Mielke, City Administrator
Adam Kienberger, Economic Development Specialist
Date: July 27, 2009
Subject: July Director's Report
Reminder: There is no EDC meeting in July. The next meeting will be
August 25th.
The following is the Director's Report for July of 2009.
Sale of the former Hearth and Home (Heat- n -Glo) Building
I was informed today that Malt -O -Meal has signed an agreement to purchase the former
Hearth and Home building on Kensington Blvd. in the Fairfield Business Campus. Malt-0-
Meal announced several months ago that it planned to relocate approximately 200 corporate
management and administrative employees out of the company's manufacturing facility in
Northfield. The move is being done primarily for food production safety reasons (e.g.
moving employees not directly involved with the food production process out of this facility)
as well as the fact that many of the management employees live in the south metro area.
Since then we have had several meetings with corporate staff about Lakeville and
particularly this location. Malt -O -Meal is in their due diligence period and if everything
works out, they plan to close on the property in September and be operational at this facility
by the end of 2009. Obviously the prospect of bringing this number of quality jobs to
Lakeville is good news.
Building Permit Report
The City issued building permits through June with a total valuation of $34,280,481. This
compares to a total of $36,064,156 for the same period in 2008. Included in this valuation
were commercial and industrial permits with a total valuation through June of $3,045,500.
This compares to a total commercial industrial valuation of $8,793,900 for the same period
in 2008.
The City issued permits for 14 single family homes in June with a total valuation of
$3,789,000. This compares to 16 single family home permits in June of 2008 with a total
valuation of $4,013,000. The City has issued a total of 54 new single family home permits
through June compared to 72 during the same period in 2008. The City issued permits for
2 townhome and condo units in June which compares to 0 townhome and condo permits
issued in May of 2008.
Development Update
The City was informed this week by the contractor of the Highview Hills Senior Housing
project on 202 Street adjacent to St. John's Lutheran Church that the building will be
turned over the Walker Methodist on Sept. 1st and occupancy of the units in this
development will begin on Oct. 1S This is approximately one month ahead of schedule.
The Dakota County CDA is also making significant progress on their Crossroads Commons
Senior Housing project located behind Cub Foods. This project is scheduled to be
completed in November. Both of these projects will offer quality housing choices for seniors
in the Lakeville area.
Transit Update
Construction continues on the 750 car parking ramp for the Kenrick Avenue Park and Ride
located north of Fleet Farm. Express transit service is scheduled to commence on
September 28 with six a.m. trips to Downtown Minneapolis and six p.m. trips back to
Lakeville. The Metropolitan Council is currently reviewing proposals from several service
providers and will make a determination by the end of August 26 as to who the service
provider will be. The Metropolitan Council is also currently advertising for bids for a round-
about to be constructed at Kenrick Avenue and 175 Street. This project was determined to
be needed to improve traffic flow to and from this new park and ride facility.
The City Council gave final approvals for the development of up to a 390 car park and ride
facility on Cedar at 181S Street which is approximately 1 /4 mile south of the Cub Foods. The
Metropolitan Council will likely only construct half of the total spaces at this time but are
acquiring enough land to have a total of 390 spaces at this facility in the future. The 181s
Street Park and Ride facility will have five a.m. express trips which will be stopping at the
new Apple Valley Transit Station and then with express service to Downtown Minneapolis.
There will also be five return trips in the PM. This service will also begin by the end of
September and will be provided by the Minnesota Valley Transit Authority.
Pioneer Plaza Planning Study
The City has received approval of $30,000 in grant funds from the CDA to do a planning
study of the Pioneer Plaza area in Downtown and the adjacent private and public parking
lots west of Pioneer Plaza in the Ben Franklin block. The first open house for adjacent
property and business owners to provide input regarding this area was held on Monday,
June 29 at City Hall. Approximately six downtown property owners or business
representatives attended the open house. Input from the open house is being used by the
consultant to develop several concepts for possible future improvements to both Pioneer
Plaza and adjacent parking lots. The goal is to complete the study by this fall so that grant
funds for possible improvements in this area can be applied for prior to the end of the year.
Foreclosure Update
Attached is the monthly update on foreclosures in Dakota County provided by the Dakota
County CDA. There have been 26 Sheriff Sales as a result of foreclosures in Lakeville in
June. This is the highest monthly total so far this year and results in a total of 106 Sheriff's
Sales for six months of this year. This compares to a total of 286 Sheriff's sales in 2008.
Review of possible changes to the monthly Director's Report
Staff is continuing to look at options for both the content and method of distribution of the
monthly Director's report. The primary objective is to determine whether it is feasible and
beneficial to provide the type of information included in the Director's report to a larger
segment of the business community. An update on this issue will be provided at the August
meeting.
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http: /www.startribune.com/ local 51308002. html ?elr= KArksUUUoDEy3 LGDiO7aiU
9% population growth since 2000 shows
metro area 'holding its own'
Met Council officials put the estimate for the seven county region at 2.87 million about
228,000 more.
By BOB VON STERNBERG, Star Tribune
Last update: July 21, 2009 9:51 PM
The Twin Cities metro area's population continues to grow, though not at the blistering
pace that marked the last years of the 20th century and the early part of this decade.
The Metropolitan Council's annual population estimate, released Monday, set the
population of the seven county region at 2.87 million, up 228,000 residents since 2000.
That represents a 9 percent increase, according to the council's statistics.
(The metro area is considerably bigger, measured as the 13- county metropolitan
statistical area: Its population topped 3.2 million last year, according to the U.S. Census
Bureau)
The rate of growth has cooled somewhat during the decade: While the population
increased, on average, by 32,000 people a year between 2000 and 2004, the average
annual increase was only 25,000 during the next four years, council researchers
estimated.
Met Council Chairman Peter Bell said the population numbers indicated "the region
seems to be holding its own in terms of growth" despite the current deep recession.
And if the council's estimates are on track with what will be measured by the 2010
Census, it could help Minnesota hold onto its eight- member congressional delegation.
Because of overall population trends, Minnesota has been on the list of states that could
lose members of the U.S. House after 2010.
And it isn't clear what the trend is for the population in the rest of Minnesota because the
state demographer's office hasn't released its most recent population estimates.
According to the council's statistics, migration to and from the metro area has been
largely stable, averaging about 100,000 people leaving or coming to the Twin Cities a
year.
As a result, the growth can been attributed to rising birthrates and longer life expectancies
of current residents, the council's researchers concluded.
During the first eight years of the decade, developing suburbs had the most explosive
growth. Shakopee had the biggest burst of growth, increasing by more than 13,000
residents. It was followed, in order, by Woodbury, Blaine, Lakeville and Maple Grove.
The council found that the central cities of Minneapolis and St. Paul are growing, which
is somewhat at odds with Census Bureau estimates released this month.
Minneapolis added more than 7,700 residents, according to the Met Council; census
estimates showed a drop of 142 residents. In St. Paul, the council estimated an increase of
1,200 residents, compared to the census estimate of a decrease of more than 7,100 people.
Such discrepancies aren't unusual in these annual estimates because the methodologies
used by the Met Council, the Census Bureau and the demographer's office differ widely,
based on different statistical measures.
Bob von Sternberg 612 673 -7184
Minneapolis and
suburbs population
is showing growth
The Twin Cities metro area's population
grew to 2.87 million in 2008, according
to Metropolitan Council annual
population estimates. Fourteen of the 15
cities experiencing the most growth
between 2000 and 2008 are developing
suburbs. Shakopee added 13,400
residents since 2000. Woodbury, Blaine,
Lakeville, and Maple Grove are also
among the communities to experience
higher levels of growth
front 2000 Population growth
Declines
Low
Moderate
Greatest
No data
Maple Grove: 9,567
Eden Prairie: 7,709
Chaska: 6,445
Blaine: 11,874
Brooklyn Park: 7,768
Shakopee: 13,401
Prior Lake: 7,000
Lakeville: 11,200
Source: The Metropolitan Council
RAY GRUMNEY Star Tribune
Minneapolis: 7,384
Woodbury: 11,967
Olson, David
From: NorthMarq Real Estate Services [info @northmarq.com]
Sent: Wednesday, July 22, 2009 1:02 PM
To: Olson, David
Subject: NorthMarq Compass Report July 2009 edition now available
07/24/2009
MiMMWRii)MANINIViii:M11111111111MM
The July 2009 edition of NorthMarq's Compass report is now available
online
Visit the web site: www.northmarqcompass.com
Highlights from the report
The commercial real estate market in the Twin Cities continues to
feel the effects of the economic downturn. In the first half of 2009,
not a single category of commercial real estate escaped negative
absorption and /or declining prices.
Vacancy is approaching record levels and will likely continue to
rise in the second half of the year. Nearly 4 million square feet of
negative absorption was recorded across all property types.
Short-term renewals have become common across all sectors as
tenants and landlords alike wait for an apparent improvement in
the economy before making any long -term real estate decisions.
Land prices have declined significantly and may be approaching
the bottom. Investment activity remains at a near standstill as
limited financing options challenge even willing investors.
Office: Vacancy approaches 18 more than 20% with
sublease
Medical Office: Some softness, but long -term prognosis is
healthy
Industrial: Demand plummets, negative absorption
reaches level not seen in 15 years
Land: Speculative and prices continue to soften; industrial
activity picks up
Retail: Recession takes its toll: highest vacancy rate in 14
years, absorption plummets
Multi- Family: Demand softens, resulting in increasing
vacancy, downward pressure on rents
Investment and Capital Markets: Credit market
North Marq Compass
This report provides exclusive
market research and insight on
commercial real estate in the
Twin Cities.
The web site provides complete
submarket information,
including charts and graphs not
available in the printed report.
The site requires all users to
create an account to access our
market research. If you've
already created an account,
use the login fields on the home
page to access the report.
If you've forgotten your login or
password, use the link on the
home page to receive a
reminder.
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07/24/2009
uncertainty, higher capital costs gridlock investment sale
market
On the Horizon
The next 12 -18 months will continue to be challenging. Indications are that vacancy will continue to
rise and more negative absorption is likely in the second half of the year. Landlords will need to be
creative and flexible in negotiating leases, and tenants with any confidence whatsoever in their
business are getting the red carpet treatment.
As reported in January, there is still plenty of capital on the sidelines waiting for further pricing
adjustments and the opportunity to invest in commercial real estate.
Tell us what you think
In continually changing market conditions, access to insightful research helps you chart strategy,
solve problems and seize market opportunities. We are continually working to improve the report for
the benefit of our readers. If you have any questions or feedback about this publication or how we
can make it more valuable for you, please let us know. You can email us at info @northmarq.com or
call us at 952 831 -1000.
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CD Dakota County
Community Development Agency
To: Dakota County Cities
From: Dan Rogness, Director of Community Revitalization
Date: July 15, 2009
Re: Foreclosure Update
Now that we're halfway through 2009, a comparison was made to show the difference between
the first six months of 2008 and 2009 for Sheriff Sales and Notices of Pendency. As was
mentioned in last month's e-news, Sheriff Sale numbers have decreased so far in 2009, whereas
Notices of Pendency have increased. A homeowner receives a Notice of Pendency after about
the third missed mortgage payment, and the Sheriff Sale typically occurs after the sixth or
seventh missed payment (however, this timeline is approximate). The following is a detailed
comparison for the first six months of 2009 from the same time frame in 2008:
Sheriff Sales
Sales decreased by 256 in 2009, a change of -23% (2008 1,106 and 2009 850).
Largest decreases: (1.) Mendota Heights, -73 (2.) West St. Paul, -55 (3.) South St.
Paul, -37 (4.) Inver Grove Heights, -33
Smallest decreases: (1.) Rosemount, -4 (2.) Eagan, -10 (3.) Farmington, -14 (4.)
Burnsville, -15
Notices of Pendency
110L
ER HI1'
Notices increased by 581 in 2009, a change of +41% (2008 1,404 and 2009 1,985)
Largest increases: (1.) Small Cities, +436 (2.) Lakeville, +76 (3.) Mendota Heights,
+72 (4.) South St. Paul, +57
Smallest increases: (I.) Rosemount, 11%; (2.) Farmington, 12 (3.) Apple Valley,
+23
West St. Paul was the only city that had a decrease in Notices of Pendency, which was a
10% decrease.
In the first six months of 2009, for every ten Notices of Pendency, four resulted in Sheriff Sales
within Dakota County. In comparison, nearly eight of every ten Notices resulted in a Sheriff
Sale during the first six months of 2008. As was mentioned in last month's e-news, this is due in
large part to those mortgage companies who placed moratoriums on Sheriff Sales during the
first part of 2009.
C Dakota County 1 Community Development Agency
Dakota County Stats June 2009
of Sheriff Sales in June 158 (compared to 176 in June 2008)
Total Sheriff Sales for 2009 850 (compared to 1,106 Jan. -June, 2008)
of Notices of Pendency Filed in June 348
Total Notices of Pendency Filed for 2009 1,985
A Notice of Pendency is filed by a mortgage company's attorney as official notification that the
foreclosure process has begun. Not all of these result in sheriff sales. Pages 3 and 4 of this PDF
file have Sheriff Sale and Notice of Pendency statistics for each city.
Mapping Using Dakota County GIS
http://gis.co.dakota.mn.us/website/dakota.netgis/
The Dakota County Office of GIS is updating the 2009 Foreclosures and Notice of Pendency
layers on a monthly basis. If you need assistance using this Web page, please call Randy Knippel
or Mary Hagerman with the Office of GIS at (952) 891 -7081.
In The News
Provided in this PDF file are a few notable foreclosure articles that were published in the last
month. Among the points of interest:
An event was held in St. Paul at the beginning of June where Minnesota homeowners
were able to speak with housing counselors and /or mortgage company representatives.
Two of the CDA's housing counselors attended the event.
A feature story on how the foreclosure crisis has contributed to expanding households.
People who have lost jobs or their home to foreclosure are moving -in with family and
friends to save money and keep a roof over their heads.
An article detailing the second wave of foreclosures that is expected to hit the Twin
Cities housing market. Sheriff sales are anticipated to increase at record levels as more
homeowners will be pushed toward foreclosure by the loss of jobs and income.
Consequently, lenders are implementing more effective ways of helping homeowners.
If you have any other concerns, please call me at (651) 675 -4464 or send me an e-
mail at drogness( dakotacda .state.mn.us.
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Homeowners find hope now
StarTribu ne,com
Page 1 of 1
Homeowners find hope now
Last update: June 4, 2009 7:48 PM
Scores of lenders and foreclosure- prevention
counselors from around the country met with
struggling homeowners Thursday during the
Hope Now event at St. Paul's RiverCentre.
Counselors spent nearly 30 minutes with
homeowners in danger of losing their homes to
foreclosure. Counselors paired homeowners with
lenders at the event and suggested new loan
workout programs that have been pushed hard
by the Obama administration.
Under various new programs, participating
lenders will assess client eligibility and re -work
loan terms. Some will reduce interest rates,
lengthen mortgage terms, forgive some principal,
or suspend monthly mortgage payments until
homeowners find new jobs or find other ways to
recoup income.
Left, Michael Grover of the Federal Reserve Bank
of Minneapolis steered homeowners facing
foreclosure or in need of services to their lenders
or to a housing counselor.Photos by GLEN
STUBBE gstubbe @startribune.com
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Full house
Irene Ruiz- Brisefio and Jesus Ruiz Flores
watched their household expand unexpectedly in
February after Jesus was laid off from his
warehouse job at Best Buy and asked his
brother's family of four to move into their small
St. Paul home.
"We now have seven people living in one house.
It's cheap rent for them and it's helping us with
our bills. I think it's extremely smart," Irene said
as the two families squeezed into the tiny kitchen
to prepare dinner recently. Two of Jesus' sisters
and their families also dropped by for dinner, and
the 13 family members quietly spilled from the
kitchen table into the living room and up the
stairs as they feasted on fragrant sauted beef and
onions, tacos, jalapefio-laden pizzas, beans,
cilantro and guacamole.
One of the visiting sisters had recently lost her
home after the adjustable -rate mortgage
ballooned and she and her husband couldn't keep
up with the payments. They now live with a
different brother in Minneapolis.
In St. Paul, Jesus, Irene and their baby live
upstairs. Brother Rafael, his wife and two kids live
in the basement that Jesus finished.
Such complicated and cramped housing
situations are being repeated across Minnesota as
the state's unemployment rate hovers around 8
percent and foreclosures continue to rise. Former
renters crash with friends. Parents welcome adult
children back into the nest or vice versa.
Siblings join forces to fend off foreclosure and
work out loans. The result is more people under
fewer roofs, creating nerve wracking chaos for
many struggling to make ends meet.
Megan Ryan, spokeswoman for the Minnesota
Housing Finance Agency, said there were 26,000
foreclosures last year and no one is certain where
those families are going. Ryan said there's been an
increase in shelter use. Anecdotally, she knows of
people leaning on friends and family, but it's hard
to say how many. The Humphrey Institute will
help the housing agency research the question
this summer.
Meantime, housing advocates and families in the
throes of such upheaval offer a glimpse at the
phenomenon. And it's not all bad.
Aside from being a homeowner, Ruiz- Briseno is
also a credit counselor at Lutheran Social Service
Financial Counseling. She said she's seeing plenty
of clients combine households because of the
lousy economy.
"I had one woman who moved her daughter in
because of a job loss," she said. "And then there
was a couple with no children who found another
couple with no children to move in with them.
They had some debt, and one of their goals was to
get out of debt and pay down their mortgage. It's
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a good idea."
Ruiz- Brisefio said some find it "very stressful" to
suddenly live with extended family or friends. It
requires a big adjustment. "Still, I think it's really
underrated. I don't know if people are scared or
ashamed, but I think, out of necessity, we will
start going back to that model."
Making it look easy
Extended families and close friends once routinely
lived together for economic reasons. And many
first- or second generation immigrants have
teamed up two or more families to buy homes and
establish credit.
Three of Jesus' 14 siblings recently moved into
the homes of three other siblings. One lost a job,
and two lost their homes to foreclosure. Ruiz
Briseno said, "It was just assumed that the family
would help."
The in -laws who recently moved into her home
will soon be paying $300 to $400 a month. That
will help pay their mortgage until Jesus fords a
steady new warehouse or construction job, she
said.
Cheryl Peterson. the mortgage foreclosure
prevention manager for Twin Cities Habitat for
Humanity, said perhaps 15 to 20 percent of the
agency's 325 homeowner clients this year have
family members who have moved in with them
recently because of a decrease in income or the
loss of a job.
The Ruiz family made it look easy when two
journalists dropped by. Jesus and Irene made
dinner and did chores with his brother Rafael,
sisters Ana and Luz Maria and two in -laws.
Meanwhile, four children joked and played with
soccer balls, dolls and a baby cousin.
"It's not as easy as it looks," Ruiz Briseno
admitted. "Everybody pitches in to clean up, but it
doesn't stay like that for long. It's a constant
thing. It takes a lot of hard work to keep that
many people under one roof" After several
weeks, everyone has learned not to hog the
bathroom and to promptly retrieve their clothes
from the washer and dryer so the next person can
do laundry, she said. "You just have to be really
conscious about how your actions affect
everybody else."
Bathroom traffic jams
It works for them. But not for everyone.
"It's hard for a nuclear family to lose privacy and
lose their space," said Elizabeth Hinz, Minneapolis
public schools' district liaison for the homeless
and highly mobile students division. "They lose
literally their alone time, and their alone -time
together, their little private interactions," she said.
Bathroom traffic jams, mounting laundry and
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Page 3 of 4
garbage, tight sleeping quarters and flaring
tempers are common side effects of doubling up
housing. Occupancy laws for single- family homes
can be complex and vary by city. In Minneapolis,
it's three unrelated adults; in St. Paul, it's four.
Other rules apply for related persons.
Laws aside, forced cooperation in housing is
growing, according to Hinz and other school
officials who monitor its impact on students.
"Yes, of course, there are kids and multiple
families staying together," Hinz said. "Yes, there is
an increase, and, yes, it is very much concerning.
This is serious."
Hinz estimates that about 80 percent of the
students her office serves are in shelters, while
20 percent are sharing space in homes, living out
of cars or on the street or squatting in vacant
buildings. Of that 20 percent, probably three
fourths land in a relative's home, she said.
Mimieapolis and St. Paul schools jump through
hoops to make sure the hundreds, or maybe
thousands, of Minnesota children aren't displaced
from their schools because they're forced to
move in with aunts, grandparents, cousins or
other family or friends.
"No matter if they are sleeping on someone's
couch, in a shelter or if they had to move because
of a landlord who kicked them out they can
have at least one stable area in their life where
they can go back to their usual school, their same
teachers and same friends," said Susan Eilertsen,
a spokeswoman for Minneapolis schools.
But the stress doesn't stop at graduation. Two
months ago, state troopers suddenly showed up
at the condo Nicole Stahlmann was renting in
Minneapolis on Franklin Avenue and demanded to
talk with her landlord. She had only dealt with his
leasing company when moving in. What was all the
fuss? Stahlmann found out days later when
foreclosure papers showed up in the mail.
Despite getting a $1,000 rent check each month,
the landlord had lost his condo, and Stahlmann
and her roommate suddenly had days to vacate
the premises.
"I was angry. I was so stressed out. I don't have
time for this right now," Stahlmann recalled. She
was in the middle of nursing exams at the
University of Minnesota, while also working 40
hours a week in Regions Hospital emergency
room. "I was overly frustrated. It was the worst of
all times."
In late February, her mom. Julie Dean, and four
friends packed up the two- bedroom, two -bath
condo and hauled her goods to Dean's house in
Maplewood. Stahlmann acknowledged that it took
some adjustment. The two sometimes squabble
over who gets the bathroom on mornings their
schedules collide, she said. But she's grateful for
the help.
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"I am at my mom's house and it's great,"
Stahlmann said. "I am saving money."
Adjustments required
In March, Heidi Vardeman, senior minister of
Macalester Plymouth United Church, opened her
St. Paul home to a family of three. The family had
moved in with a cousin after being evicted. But
shock rendered the wife practically immobile in
bed.
"It was like my body would not do anything," said
the woman, who asked to remain anonymous. "So
Heidi started telling me all the reasons it would
be a great help if we all came to stay with her," she
said. "Her offer helped me and my family start to
have a life again."
Vardeman moved to a downstairs bedroom. The
couple, their daughter and two dogs moved
upstairs. They celebrated Passover and Easter
together, share groceries and eat on the couple's
dishes. The husband and wife installed cable TV
and had a relative make repairs around the home.
Though the arrangement has worked out, it's
required some adjustments. The wife recalled an
incident when she had just washed the floors and
admonished Vardeman to take off her shoes. She
said Vardeman, who has foot problems,
responded that it was her house, and she'd keep
them on.
"It was a true lesson for me," the wife said. "I have
lived in my house for 11 years under my rules.
Now I am living in her house under her rules."
Dee DePass 612 -673 -7725
6/10/2009
One -two punch hits housing market TwinCities.com
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com
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One -two punch hits
housing market
Lenders brace for second round of foreclosures
By Christopher Snowbeck and Nicole Garrison Sprenger
Pioneer Press
Updated: 06/27/2009 07:58:30 PM CDT
A second wave of foreclosures is washing over a
Twin Cities housing market that's still dealing with
the first surge a round of foreclosures that
swamped thousands of troubled borrowers while
sinking values for homeowners across the region.
The first foreclosure wave led to a relative pause
this winter and spring in sheriffs sales, which are a
key step in the foreclosure process.
But housing experts warn that lenders are likely to
resume foreclosing on homes at near record levels
this year as more homeowners are pushed to the
brink by the loss of jobs and income.
The great unknown is the extent to which lenders
will work with struggling borrowers to modify
mortgages and keep people in their homes.
A flood of foreclosed properties has been the key
factor in a dramatic 37 percent decline in the median
sale price for a home in the Twin Cities between June
2006 and February of this year, according to local
trade association statistics. The second foreclosure
wave could further delay a housing recovery.
"The people who said the foreclosure boom was
over they were whistling in the dark," said Paul
Weingarden of Usset, Weingarden Liebo, a St.
Louis Park -based law firm that represents lenders in
foreclosure proceedings. "It's not over. It's just a
lull."
Experts say that many foreclosures in the first wave
were concentrated among subprime borrowers who
took out mortgages they couldn't afford to purchase
homes in weak housing markets. While some of
those defaults continue, the next wave also is hitting
borrowers who had higher incomes, and is more
evenly spread across the metro area a distinction
that gives hope to some.
This time around, improvements in loan
modification efforts or a rebound in the economy
could keep a significant number of struggling
borrowers in their homes, said Prentiss Cox, a law
professor at the University of Minnesota who studies
the housing market. That's different from the first
foreclosure wave in which many borrowers were
destined to lose their homes, he said, because their
loans were so poorly structured.
"The key to the next wave is that it depends on
economic conditions including jobs, income and
interest rates," Cox said. "And it is probably
manageable with good public policy, which was not
as true for the first wave."
There's a chance the recent trend of declining
sheriff's sale totals will continue, Cox said,
especially if the federal government aggressively
implements a program outlined this spring to
encourage banks to modify the terms of troubled
loans.
Wells Fargo Home Mortgage, one of the largest
mortgage service companies in Minnesota, says it is
working cooperatively with the government to
prevent foreclosures where possible.
Thanks to the federal program and a related
I Fos .roat D narni
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One -two punch hits housing market TwinCities.com
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com
Page 2 of 3
outreach effort called Hope Now Wells Fargo has
had considerably more success contacting troubled
borrowers to discuss options short of foreclosure,
said Joe Ohayon, a vice president with the company.
At a Hope Now event in St. Paul this month, for
example, Wells Fargo officials sat down with about
90 homeowners struggling to make their mortgage
payments.
Dennis Breisler, of Cottage Grove, was one of more
than 700 troubled borrowers who attended the Hope
Now event. He was able to meet with his lender,
Ocwen Financial, and went away feeling encouraged
after he was told to fax more information for review.
"This was helpful and good," said Breisler, who has
fallen behind on mortgage payments because of
reduced income from his wife's child care business.
"Sometimes people just need a hand."
In the past year, lenders have changed how they
work with troubled borrowers, said Ohayon of Wells
Fargo. That's because many homeowners were going
back into default after lenders offered repayment
plans that simply spread missed payments across
several months.
Now, banks are more likely to consider outright
modifications that offer significant relief in the size
of payments, Ohayon said. Even so, it's unclear
whether the efforts will be enough to stem the
foreclosure tide.
"The level of foreclosures, I can't predict," Ohayon
said. "The biggest unknown is unemployment."
During the first quarter of 2009, Minnesota lost
about 45,000 jobs, as the state's jobless rate in
March reached a 26 -year high. In May, the jobless
rate in Minnesota pushed up to 8.2 percent, and
some economists think it will peak at just under 9
percent at the end of 2009 or in the first part of
2010.
Much of the recent decline in sheriff's sales across
Minnesota, experts say, came from lenders who this
winter decided to suspend foreclosure proceedings.
But those moratoria ended in February and March,
which is part of the reason Ed Nelson, a spokesman
for the St. Paul -based Minnesota Home Ownership
Center, said sheriffs sales in Minnesota are
expected to make a comeback and return to a level
similar to last year's record levels.
In an ominous sign of what could be coming,
counselors who work with troubled homeowners in
Ramsey County saw a dramatic spike in the number
of pre foreclosure notices they received from
lenders in May.
Those counselors received an average of about 475
pre foreclosure notices per month in January
through April. May notices were triple that at 1,502,
according to numbers from the Home Ownership
Center, which coordinates foreclosure prevention
counseling services across the state.
It can take a long time for banks to complete a
foreclosure in Minnesota, where the process often
includes a redemption period that stretches six
months after a sheriff sale. So the recent surge in
pre foreclosure notices in Ramsey County, for
example, could translate into bank -owned homes
that don't even hit the housing market until the first
few months of 2010, said Michelle Vojacek,
coordinator of the foreclosure prevention program
for the city of St. Paul.
A lot of those homes will be selling in
neighborhoods that haven't been identified as the
city's foreclosure hot spots, she said.
Bankers say they've noticed a similar shift in
foreclosures from the inner city and first -ring
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suburbs to the outer suburbs in recent months. And
where once subprime and adjustable -rate mortgages
made up the bulk of problem residential real estate
loans, bankers are seeing more prime borrowers
with 30- year -fixed mortgages who are in or on the
brink of foreclosure today.
"As we've seen the unemployment rates rising
throughout the state, we are seeing a second wave
of foreclosures that are affecting all walks of life,
and those in particular who have encountered a job
or wage reduction or loss," said Joe Witt of the
Minnesota Bankers Association.
Indeed, the demographics of folks seeking
foreclosure prevention counseling have become
more middle- class. In 2007, the average income of a
person who received housing counseling was
$24,195, according to the National Foundation for
Credit Counseling. Last year, that average income
nearly doubled to $44,973.
That's bad news for the banking business.
On average, a foreclosure costs a bank $60,000,
according to the Minnesota Bankers Association.
That figure is likely to rise as more prime borrowers
living in the suburbs, who generally own bigger and
more expensive homes, find they can't pay their
bills.
The migration of foreclosures to prime borrowers
reflects the ongoing problem related to the
economy," said Keith Leggett, senior economist with
the American Bankers Association. "This will keep
the inventory of homes on the market at elevated
levels, adversely impacting housing prices."
The prospect of a big supply of low- priced
foreclosed homes entering the market is part of the
reason Scott Anderson, an economist with Wells
Fargo in Minneapolis, said he expects soft pricing
in the housing market for another year or so.
There had been hopes among some local real estate
agents that trends might be going in the other
direction, as the median sale price during May came
in at $165,000 a modest increase from the
February median of $150,000 for the 13- county
metro area.
What's more, agents have been swapping stories
about bidding wars that have emerged for some
foreclosed properties.
But Terry Records, a real estate agent who
specializes in selling bank owned properties with
Keller Williams Premier Realty in Woodbury, said the
sales figures for May primarily reflected a
resurgence in the number of traditional home -sale
transactions, not a lasting decline in the foreclosure
market.
Competition for foreclosure properties has been fed
in part by a federal tax credit program for first -time
homebuyers at a time when the foreclosure
moratoria curtailed the supply of homes. The
problem going forward, Records said, is that the
first -time homebuyer tax credit is set to expire in
November, meaning the buyer activity could be
concentrated in the short term.
"The tax credit needs to be extended," she said.
Christopher Snowbeck can be reached at 651-228
5479. Nicole Garrison Sprenger can be reached at
651 228 -5580.
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