Explaining Minnesota's high rate of bank-owned sales

It's been a ponderous question that has stumped even my smartest sources: While Minnesota has a relatively better economy and a consistently average foreclosure rate, why are foreclosures as percentage of all home sales among the highest in the nation?
During the first quarter, for example, 51.7 percent of closed sales were bank-owned, according to the most recent data from Clear Capital. Nationwide the average REO saturation rate was just 33 percent; only Fresno, California (52 percent) and Detroit, Michigan (58 percent) saw higher REO saturation rates.
Clearly, the Twin Cities is no Detroit and it's certainly no Fresno. So what gives? Clear Capital's director of research and analytics, Alex Villacorta, offers an interesting theory. He says that the region's high saturation rate has more to do with buyer appetite than it does the overall health of the market. Specifically, investors and first-time buyers see a tremendous opportunity to buy in the Twin Cities because prices are low, economic fundamentals are improving and demand for rentals has strengthened at a time when supplies are particularly tight. The vacancy rate in the Twin Cities metro area fell by half to a little more than 3 percent in the Twin Cities metro during the first quarter, according to Marquette Advisors. And the homeownership rate is expected to continue falling.
So because those investors and first-time buyers tend to target low-priced distressed sales, they're increasing the overall share of bank-owned sales well beyond demand by move-up buyers who tend to focus on traditional listings.
Villacorta said the trend, which isn't necessarily a reflection of weakness, is actually a sign of strength because it could mean that buyers will burn through the available supply of distressed-sale properties faster than other regions.
"It means maybe some stabilization is ahead," he said. "It's a necessary evil, it's both a blessing and a curse."