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Short sales continue to bedevil the Twin Cities real estate market. Even as the Minneapolis Area Association of Realtors last week 

of year-over-year median price increases for traditional home deals, it noted short sale values slid again.

 the short sale supply in the Twin Cities remains big and the market here really won't recover until that inventory gets sold.

"I think short sales are going to be a big deal for the foreseeable future ... maybe three-plus years." said Carrie Newhouse, a Twin Cities Realtor who writes the 

, has a lot of experience working with short sales. We asked her recently for a practical look from her vantage point at the process and its challenges.

In short sales, the homeowner owes more on the house than he'll get from the sale. The bank, which likely ends up losing money on the deal, must sign off. That creates a tough situation with lenders wanting to protect their financial interests and Realtors, sellers and potential buyers frustrated by an approval process that can drag on for months.

"Short sales are a key component to the recovery of our real estate market," Newhouse said. "On my team, we are handling about 40 short sales at any given moment and we have seen changes in that specialty market over the last eight months."

Short sales hurt housing markets. Their numbers in the metro area were negligible in 2006 before the recession. By October 2007 they passed 2,700 homes and jumped to 4,500 a year later, according to data from the Minneapolis Realtors group. The inventory was down to about 4,100 by January but still way more than the market can handle.

Getting them sold is crucial to the recovery, though Realtors and bankers tend to view short sales differently. Lenders are trying to minimize their losses on these deals and Realtors are trying to sell them.

Newhouse, though, is seeing some of the ice start to break. "Many banks have improved their time lines," she said.

Newhouse also gave some insights into the increasing problem created by second mortgages on troubled properties. It's a problem MPR's Annie Baxter 

"We are hearing of people who are hearing from their second mortgages, or their collection agency, years after the foreclosure action," Newhouse told us.

We'll save her perspective on that for another post.

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Click on the map icons below to read what Minnesotans in our Public Insight Network have been telling us over the past year about the housing market around them and then 

Business and Economic News

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Paul Tosto

Author

Short sale homes may be a problem in the metro area housing market for three years or more, one Realtor says.

Years away from cleaning up the short sale mess?

Go Deeper.

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