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Price Reductions Driven by Minneapolis Foreclosure Auctions

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By : John Cutts    99 or more times read
Home price reductions stepped up in April as more properties entered Minneapolis foreclosure auctions in the previous three months, based on data from the Minneapolis Area Association of Realtors and a real estate information provider.

With 40 percent of homes sold taking price reductions in April, Minneapolis topped all other 49 large metro areas which experienced the highest rates of price reductions during the month. Second was Milwaukee, which had 37 percent of its houses sold with reduced prices.

The average price reduction in the Minneapolis area was 8 percent of the listing price, pushing up the combined total of price reductions in April to $25.3 billion.

Despite the significant price reduction percentage, the median price for all types of homes sold in Minneapolis and Saint Paul in April increased to $169,800, a jump of 11 percent from $153,000 over the year and marking the fourth consecutive time the median price increased year-over-year.

Home sales also increased in the Twin Cities, largely due to efforts of homebuyers to beat the April 30 deadline of the federal tax credits. A total of 5,781 purchase contracts were signed, a sharp jump of 11 percent and marking the highest monthly sales since August 2005, based on sales figures from the realtor association.

Price reductions stepped up largely because of the increased number of homes that defaulted and that entered Minneapolis foreclosure auctions in the first three months of the year. A total of 8,305 homes in the Minneapolis-Saint Paul region were put into foreclosure during the quarter, marking a 22-percent jump from the same period last year. It was however two-percent lower than total filings in the previous quarter.

Similar to the Twin Cities, the pace of foreclosure auctions in Minnesota also increased in the first quarter, although at a small rate compared to the pace in the previous quarter. More than 9,200 homes were put into foreclosure, including around 3,800 units in pre foreclosure and 5,373 units already in the REO listings of banks. The first-quarter filings marked a 0.1-percent rise from the prior quarter and a sharp 29-percent jump from the same quarter in 2009.

In March, statewide foreclosure filings also surged. A total of 3,762 homes were notified of default or foreclosure, marking a spike of 52 percent from the prior month and a jump of 22 percent from March 2009.

Of the total March filings, 59 percent or 2,205 homes were repossessed by banks. In the entire first quarter, the REO share was 58 percent of total quarterly filings. With these high shares of REO units, finding cheap foreclosed homes for sale in Minnesota is a viable pursuit.

The surge in foreclosures was due in part to unemployment, which surged in Minnesota from 8 percent in February to 8.2 percent in March. In the Minneapolis-Saint Paul area, the jobless rate rose to 7.8 percent in March from 7.6 percent in February.

While the increase in unemployment contributed to the surge in Minneapolis foreclosure auctions in the first quarter, increased foreclosure activity drove price reductions in April.

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