New data out Thursday from research firm RealtyTrac show foreclosures accounted for 23 percent of the state's home sales in the fourth quarter of last year.
The data also show sales of bank-owned homes were up 65 percent over the same time in 2010.
RealtyTrac's Daren Blomquist said lenders are beginning to clear out their inventory of foreclosed homes.
"At least in Minnesota, lenders are starting to push through and actually list for sale these bank-owned properties that they may have been holding onto for a while," Blomquist said.
Blomquist said the increase in foreclosures on the market could keep home prices depressed in the short term.
The increase could be related to the recent settlement between state attorneys general and the nation's five biggest banks, Blomquist said.