The Twin Cities had the unfortunate distinction in March of having the biggest home price decline in the Standard & Poor's/Case-Shiller Home Price Index.
Real estate experts say the numbers reflect continued weakness in the metro area's housing market. But they also caution against reading too much into the price decline.
In a way, the Case-Shiller numbers aren't a big surprise. Local Realtor associations have been reporting year-over-year price declines in the metro area for a while. Case-Shiller numbers lag the local data by two months, but generally the two numbers track fairly closely.
Case-Shiller reported Tuesday that Twin Cities prices fell 10 percent over the year ending in March. That was the worst showing among the 20 cities Case-Shiller follows.
David Blitzer, chair of the S&P Index Committee, notes that the Twin Cities also had the biggest monthly decline in the index. Home prices here tumbled nearly 4 percent between February and March.
Blitzer has some theories about why that's the case. He says when you break the home sales captured in the index into thirds, and look at the bottom third -- the lowest-priced homes -- you'll see a lot of the problem lies there. Blitzer says the bottom tier saw a price drop of 6 percent from February to March. But the top third only saw a price decline of 2 percent over that period.
"The data from March, looking at the bottom third, show unusually large declines in prices. That usually means that the proportion of short sales, foreclosures, jumped substantially from the previous month or two," said Blitzer.
"We don't seem to be at the bottom. We actually seem to have a double dip."
"I don't think it means the worst market in the country. It means we have a higher percentage of foreclosed sales going through," said Herb Tousley, director of the Master of Science Degree in Real Estate at the University of St. Thomas.
Tousley agrees with Blitzer that the Case-Shiller numbers probably captured more foreclosure sales than usual. It's worth noting, Tousley says, that you won't see such big price declines for traditional homes.
"If you look at the traditional sales, they're down a little, but they're not down that much," Tousley said. "For someone that doesn't have to sell but is wanting to sell their house in the normal fashion, those Case-Shiller numbers don't represent what's happening to everybody."
Foreclosures and short sales are playing such a big role in the Twin Cities housing market right now partly because of investors -- who are often landlords, according to Aaron Dickinson, a Realtor with Edina Realty. He says investors are ramping up their purchases lately in the Twin Cities.
"With that huge number of investors out there in the marketplace -- those are the people going after screaming deals," said Dickinson.
There is one bright note. The median home price in the Twin Cities rose by nearly 4 percent in April, according to the Minneapolis Area Association of Realtors. The next Case-Shiller report may reflect that.
But as investors snatch up properties at fire sale prices, the median home sale will likely tick lower. That worries economist Jeanne Boeh of Augsburg College.
"What I think is unfortunate is we don't seem to be at the bottom. We actually seem to have a double dip," Boeh said.
Boeh says as prices descend, more homeowners will be underwater on their mortgages -- owing more than their home is worth. And that will inhibit people from selling their homes. The result: the market will continue to be dominated by foreclosures and short sales.
"All that means we are not coming out of this housing market anytime soon," she said.
But here's some consolation. Case-Shiller says Twin Cities home prices are down 38 percent from their peak. It's a worse than the 20-city average, but other cities fared even more poorly.
Some of the sharpest price declines have occurred in cities hit hardest by unemployment and foreclosures, such as Phoenix, Tampa and Las Vegas. They are flooded with homes sitting vacant, awaiting buyers. Many banks have agreed to allow homes at risk of foreclosure to be sold for less than what is owed on their mortgages. That trend has pulled down prices.
Coastal areas, such as San Francisco, San Diego, Los Angeles, Washington and Boston, have fared comparatively better in the past two years. They have been aided by healthy local economies and low unemployment, desirable city centers and limited space for new housing.
In the seven years before its peak in July 2006, the home-price index surged 155 percent. Since then, it's fallen 33 percent.
(The Associated Press contributed to this report.)