New data show home prices fell in the Twin Cities last month, as financially distressed properties made up nearly four in 10 sales for a second month in a row.
But Wednesday's monthly report by the Minneapolis Area Association of Realtors also shows the demand for housing continues to recover.
July was the third consecutive month in which the number of signed purchase agreements posted a double-digit rate of increase over the same period a year ago. Back then, sales were particularly weak after the expiration of a federal homebuyer tax credit.
University of Thomas professor of real estate George Karvel said the latest report is mostly positive.
"Probably the only cautionary note is the large number of lender-mediated sales and properties that are for sale representing nearly 32 percent of those available," he said. "That's a huge number. So we're not out of the woods yet, but we're getting there. I think we're at least halfway."
Karvel said foreclosed homes and short sales would be less than 10 percent of the total in a healthy market.