Minnesota’s Pre-Foreclosure Decline Masks a Deeper Housing Crisis

In the quiet neighborhoods of Minnesota, where neatly trimmed lawns meet suburban streets, a silent struggle is unfolding. After spiking in 2023, the number of homes slipping toward foreclosure has fallen significantly in the past year. At first glance, the data suggests a reprieve. Yet behind each statistic is a story of financial strain, rising costs, and families clinging to their homes despite crushing economic pressures.

Last June, Minnesota saw 576 properties fall into pre-foreclosure—an early warning sign for homeowners behind on their mortgage payments. This June, that number plummeted to 306, a 46.88% decline from last year. Compared to last month alone, there’s been an 18.62% drop, down from 376 pre-foreclosure filings in May.

For housing advocates, these numbers raise more questions than relief. Is this a sign of stability, or are families simply finding other ways to stay afloat—through second jobs, loan modifications, or even dipping into retirement savings?

The Human Toll of a Housing Slowdown

For homeowners like Jackie Reynolds, a 42-year-old mother of three in the Twin Cities suburbs, the numbers mean little when the bank notices keep arriving. Reynolds bought her home in 2018 when mortgage rates hovered near historic lows. But as prices on everything from groceries to gas skyrocketed post-pandemic, she fell behind—first on utilities, then on credit cards, and finally, her mortgage.

“Every month, I’m playing a game of survival,” she says. “Something’s always got to give, and lately, it’s been the mortgage.”

Despite the declining foreclosure data, thousands like Reynolds still live on the edge financially. And though the state’s pre-foreclosure rate is easing, the broader picture of homeownership remains precarious.

The Boom, the Bust, and the Adjustment

Minnesota, like much of the country, has seen cyclical waves of housing distress. The 2008 financial crisis sent pre-foreclosures skyrocketing, peaking at 26,220 filings in 2010 as homeowners collapsed under the weight of bad loans and a collapsing economy.

Since then, pre-foreclosures have fallen dramatically. By 2021, in the aftermath of the pandemic, mortgage delinquencies hit historic lows—just 177 filings statewide. Federal protections, mortgage relief programs, and stimulus checks helped keep families in their homes, if only temporarily.

Then, in 2023, reality set in. Inflation soared, interest rates climbed, and the economic safeguards of the pandemic era faded. Homeowners who had bought at the peak of the market suddenly found that their adjustable-rate mortgages were adjusting in all the wrong ways. That year, Minnesota saw 6,372 homes in pre-foreclosure, a 440% increase from 2022.

Now, in 2024, things appear to be stabilizing—with just 2,511 pre-foreclosures reported in the first half of the year. While still significant, it suggests Minnesota could be turning a corner—or at the very least, experiencing a temporary lull in filings.

A False Sense of Stability?

Experts warn against celebrating too soon. The decline in pre-foreclosure filings doesn’t necessarily mean homeowners are financially secure; rather, it may reflect changing strategies for avoiding foreclosure. Some borrowers are refinancing where possible, stretching their household budgets thinner, or selling their homes before credit issues prevent them from doing so.

“We’re seeing more people in financial distress who are just barely holding on,” says Mark Dunwell, a housing counselor with Twin Cities Housing Partnership. “They might not enter the formal pre-foreclosure process, but that doesn’t mean they’re not at risk of losing their homes.”

For those in lower-income brackets, the battle is even harder. Many families in areas with historically lower homeownership rates are seeing their rents and mortgages consume an ever-larger share of their income. Though pre-foreclosure numbers are down, the fear of losing a home still looms large.

What Comes Next?

If broader economic trends hold—if inflation continues to retreat, if wages rise, and if mortgage rates stabilize—Minnesota’s foreclosure rate could remain low. But recent history has taught homeowners to be wary of optimism. Even as the trend moves in the right direction, uncertainty still defines housing markets across the state.

For now, though, Minnesota homeowners can exhale, at least a little. The numbers show fewer pending foreclosures, fewer households at immediate risk. However, for families like Jackie Reynolds, survival remains a month-to-month gamble.