Home prices in the Twin Cities metro area fell 3 percent during February and have now given up nearly all the gains they made during a brief recovery last year, according to the latest Standard & Poor's/Case-Shiller report.
Prices were down 8 percent compared with last year at this time, the biggest drop among the 20 major metropolitan areas in the report. All but one of the 20 areas saw month-to-month price declines, dashing hopes in the Twin Cities and beyond for the prospect of a meaningful and sustained stabilization of home prices.
"There is very little, if any, good news about housing," said David Blitzer, chairman of Standard & Poor's index committee.
The report is considered a significant indicator of home prices because it reflects changes in the value of individual homes by tracking repeat sales. It includes foreclosures and short sales, but it doesn't track sales of condominiums.
Nationwide prices during February were down 1 percent from the previous month -- the eighth consecutive monthly decline. Adjusted for seasonal factors, the index declined 0.2 percent.
According to a 20-city composite index, home prices nationwide bottomed in April 2009 when the index hit 139.26, compared with a baseline of 100 in 2000.
But after a tentative rebound, in which Twin Cities prices rose 12 percent, prices resumed falling and most cities have given up any gains. During February the nationwide index dropped to 139.27.
Despite improvements in most of the fundamentals that would normally put upward pressure on home prices, foreclosures continue to dominate the market, putting downward pressure on prices and flooding the market with houses that are in tough shape.
The February index for the Twin Cites fell to 110, just 0.4 percent above a low set almost two years ago in May 2009.
Blitzer couldn't explain why recent price declines were so large in the Twin Cities, but he cautioned that the metro has fared well in previous reports.
He said prices in the region are still almost 10 percent above the January 2000 index baseline, which means that if you bought a home then, its value would be up about 10 percent. Atlanta, Cleveland, Detroit and Las Vegas were all below the January 2000 baseline in February.
Still, prices in the Twin Cities have lost most of the gains they achieved during 2010 when the federal home buyer's tax credit helped boost sales and hopes that prices had reached bottom.
Foreclosures are the likely culprit. Sales data from the Minneapolis Area Association of Realtors showed that during February, short sales and foreclosures represented 60 percent of all closed sales.
Aaron Dickinson, a sales agent with Edina Realty who helps the Minneapolis Area Association of Realtors track foreclosure activity, said that sales activity in March and April has been relatively strong.
In addition, inventory levels have fallen, increasing the likelihood of upward pressure on prices, especially for houses that haven't been through the foreclosure process. Still, some lenders with houses they need to unload are willing to accept lowball offers on already deeply discounted prices.
Brian Smith, a sales agent with Remax Results, said that in February he submitted an offer on behalf of a buyer on a bank-owned house in south Minneapolis. He offered much less than list price, and the lender took about 5 percent less than it had sought.
Despite theories about the impact of foreclosure on prices, Detroit -- one of the hardest-hit cities in by the foreclosure crisis -- was the only city tracked by the report that showed in increase in sale prices from January to February.
Jim Buchta • 612-673-7376
