Minnesota's decline in foreclosure sales is tied to how they are processed.
The number of Minnesota foreclosures fell sharply last month, but a jump in default notices in November could cause home repossessions to soar in the coming months.
RealtyTrac said Thursday that overall foreclosure activity in the state fell 15 percent from October to November and was down almost 20 percent from the same month last year.
During the month there were 1,530 foreclosure notices and 1,058 repossessions in the state. The number of initial foreclosure notices sent to Minnesota homeowners increased 21 percent from a year ago following seven straight months of declines.
"Despite a seasonal slowdown similar to what we've seen in each of the past four years, November's numbers suggest a new set of incoming foreclosure waves," said James Saccacio, co-founder of RealtyTrac.
He said that many of those properties may roll into the market as bank-owned homes or short sales early next year.
The declines in Minnesota's foreclosure activity were much bigger than the U.S. average.
Nationwide, foreclosure activity, including default and auction notices, were down 3 percent from the previous month and down 14 percent from November 2010.
The 14 percent drop is the smallest annual decrease of the past 12 months, but some bellwether states such as California, Arizona and Massachusetts posted year-over-year increases in foreclosure activity last month. Nationwide one in every 579 housing units was in foreclosure compared with one for every 901 housing units in Minnesota.
In Minnesota and other states, the decline in foreclosure sales is largely due to delays in the way foreclosures are processed. Lenders have been caught in a legal battle over how foreclosures are handled, leading to a complete reevaluation of the system. Specifically, some companies have been accused of processing paperwork without careful examination.
Daren Blomquist, RealtyTrac's director of marketing and communications, said the time it takes to process a foreclosure increased from 281 days last year to 336 days. So even though defaults are up, fewer of them have gone all the way through the process.
"It's too early to celebrate the end of the foreclosure era," he said. "There's too much risk still in this market. There are too many homeowners who are struggling."
In the Twin Cities, nearly a third of all home sales are bank-owned or short sales that are selling for a fraction of what their original price.
Dan Hylton, data manager for Minneapolis-based Housing Link, said that aside from general economic conditions, one of the most significant factors still looming is how many houses are bank-owned, but not yet on the market.
Jim Buchta • 612-673-7376