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Management Analysis

Foreclosures

Why this is important
Foreclosures are a significant financial and emotional drain on all those involved and can cause residual issues.  For example, proximity to a foreclosed home can decrease the value of homes nearby and when several foreclosures have occurred in close proximity, in some cases, crime or property damage has increased. Homeowners in associations will experience missing dues from those in foreclosure. Renters can lose not only their housing, but also security deposits when property owners or landlords face foreclosure. Cities must also perform added tasks that drain public finances, such as responding to increased code enforcement needs, property abandonment, public safety issues, and delinquent utility bills.  Entities such as the Community Development Agency (CDA) must also continually increase and improve their outreach, education and assistance programs in response to such a significant increase in foreclosures in a short period of time.

ForeclosuresWhat the data show
This chart shows total notices of pendency (the first formal step in the process of foreclosure) and foreclosures (as represented by Sheriff’s sales) in Dakota County. Notices of pendency peaked in 2009 at 3,886 and have declined over the last five years.  Between 2008 and 2011, foreclosures in Dakota County fluctuated around 2,000 foreclosures per year but showed great improvement in the last three years.  Between 2011 and 2014, notices of pendency and foreclosures fell by 36% and 31%, respectively.  In the early 2000s, foreclosures in Dakota County ranged between 150 and 450 on an annual basis, and their numbers increased as the number of residential properties increased with the growing population.  According to the chart below, the number of foreclosures in Dakota County is moving back to levels similar to the early 2000s, when about half of one percent of residential properties was a normal annual foreclosure rate.

ForeclosuresData are not available to clearly identify whether foreclosures in Dakota County are affecting primarily homeowners or investors, but the effects are being felt in different types of communities ranging from older homes to newer developments in growing suburbs.  For example, the most populous Dakota County cities saw the highest numbers of foreclosures in 2010 (the end of the recession impact): Apple Valley, Burnsville, Eagan and Lakeville. However, foreclosures have been decreasing since then.  As a proportion of households, the highest rates of foreclosure in 2014 were in Farmington (0.8%) and South St. Paul (0.6%). 

At the beginning of the dramatic increase of foreclosures in 2007, the most common reason for homeowners to be in foreclosure was the loan type (non-traditional, sub-prime) and homeowners who would not have financially qualified for traditional loan types. However, since the economic recession in 2009 there has been a shift in the types of loans that are going into foreclosure. Most are fixed-rate mortgages that homeowners could afford until suffering a job loss, health issue or change of household income for some other reason, which made them unable to pay what once was an affordable mortgage. 

Last updated: 4/3/2015 5:59 AM