Overlooked: Wright County's "Ghost Towns" — Apr 23rd 2008

By Dakota Smith

Story: Minnesota's New Ghost Towns
Propeller user: Buglover

If there's an epicenter to the country's real-estate downturn, it may be just be Wright County in Northwest Minnesota. As outlined in the recent three-part Star-Tribune feature "From Boom to Bust," the county, located 30 miles from the Twin Cities, is facing the brunt of the subprime mortgage meltdown and overbuilding.

Starting in the late 1990s, ambitious developers carved out large acreages, building inexpensive subdivisions and selling many of the units to buyers as investments. Today, these same homes in Wright County, which has a population of about 114,787, have gone unsold or been abandoned by buyers unable to pay their mortgage payments. This has in turn created an epidemic of "ghost-towns." As the Star-Tribune notes: "There are few trees or hills in this flat, predominantly rural county to obscure the evidence: Rows of vacant and unfinished homes, often with lockboxes on the front doors and foreclosure notices taped to the windows. Realtors call them 'see-through houses,' so empty of furniture and curtains that it's possible to see right through them."

Values in the country have declined 30 percent in the last year. (By comparison, in Los Angeles County, also considered a down market, the median sale price declined 18.5 percent from a year ago.) Wright County is bracing for 1,080 foreclosures this year, up 43 percent from a year earlier, according to the paper. On average, there are 43 foreclosures a week.

The Star-Tribune story is "a snapshot of what we're going through," says Zachary Adams, a real estate agent at Wright Sherburne Realty Inc. in Monticito. Adams, whose firm was featured the newspaper piece, has typically sold about 6,000 units in the Twin Cities area each year. But he estimates that there is now five to six years of inventory on the market. As to why prices climbed so high, especially in comparison to other regions, Adams is blunt: "These new prices were artificially inflated. Investors were appraising the homes as high as they could get them."

Putting aside the economic strain on the area--many towns had figured on tax dollars from the developments coming their way-- there is the simple matter of the abandoned homes. Inexpensively made and erected quickly, the houses are now a blight on the landscape. "There are no architectural features on the homes," says Adams. "If I am selling to bulk and all I am doing is selling to investors, then it's all about cost vs. sale price." (Some sample listings off the Wright County Minnesota MLS can be found here.)

Given that he's a homeowner in Minnesota, the story caught the attention of Propeller user Buglover. "I'm trying to move to the Twin Cities, " he writes in an email. "With what I can sell my current house for, I wouldn't be able to come up with a down payment. So the real estate market is becoming somewhat of an obsession for me."

But unlike those waiting for the market to recover, Buglover sees investment prospects in all those empty houses. "If I had the cash, I would grab up some of these deals, and just sit on them for a year or two, [waiting] for the market to come back around," he writes. Clearly, that's something that other Minnesotans have in mind. If there's anyone who stands to make money off the real estate downturn, it may be investors who can grab these foreclosed or abandoned properties, Adams told Propeller. "They'll purchase after the units are sold back to the bank."

Part 1: Minnesota's new ghost town
Part 2: Housing bets gone bad
Part 3: Housing downturn has suburbs stuck with the bills

Tags: real estate, subprime crisis, Wright County

2 Comments