The Twin Cities housing market showed mixed signals in the latest report from Case-Shiller. Home prices increased by nearly 3 percent between April and May. Sixteen of 20 large U.S. cities also saw a monthly gain.
However, the Twin Cities continues to lead the index in year-over-year home price declines, falling off nearly 12 percent between May 2010 and May of this year. (Local realtor groups, using different methodologies, had reported a similar year-over-year decline of 11 percent for the period in question).
Twin Cities home prices have had an erratic performance in the Case-Shiller index, sometimes turning in the biggest losses and sometimes the biggest price gains, says the index committee chair David Blitzer.
"Which says to me that there are probably a lot of foreclosures that show up in big lumps," he said. "Events like that tend to make the prices swing a lot."
Foreclosures also complicate the seasonal adjustment process. The seasonally adjusted Twin Cities home price in May was largely flat from the month before. Blitzer says the non-seasonally adjusted price gain of 2.6 percent over that period is probably more accurate.
Herb Tousley, a real estate expert at the University of St. Thomas, says a high percentage of foreclosure sales and short sales continue to drag down overall prices, and traditional home prices are about 40 percent higher than distressed properties.'
"When you've got 45 percent of all the sales foreclosed, that makes the overall index look bad, although if you're a traditional seller selling a normal home, it's not as bad as it looks," he said.
According to the Minneapolis Area Association of Realtors, the share of distressed sales-which include foreclosures and short sales-accounted for 38 percent of all Twin Cities home sales in June. That's the lowest level since June 2010.
Still, Tousley says it could take 12-18 months to clear the market of foreclosures, which likely means continued downward pressure on home prices.
The housing market has been a drag on the broader economic recovery. Home prices affect individuals' sense of wealth and play a role in consumer confidence.