House prices in the Twin Cities are still struggling to gain traction, but a new report from Fiserv Case-Shiller Indexes, which track home price trends in more than 380 U.S. metro areas, says that price increases are coming. The report said that prices are expected to fall another 2.3 percent by the end of next year in the metro, but will post a 5 percent annual gain by the fourth quarter 2013.

Nationwide prices were down 4 percent during the fourth quarter, hitting a post-bubble low with prices expected to decline another 0.8 percent by year-end. Prices are expected to improve next year with an average annualized increase of 4.2 percent by 2013.

David Stiff, the Fiserv chief economist, said that the year-over-year decline in prices don't tell the full story. David Stiff, the Fiserv chief economist, said that the year-over-year decline in prices don't tell the full story.

"Nearly all non-price metrics – existing home sales, rising home order volumes, increased spending on home improvement, a jump in multi-family construction – indicate that the housing sector hit bottom last year and has started along a path of slow recovery."

Stiff said that the recovery will be driven by investors, primarily in lower-cost markets, and that's why the true state of the market isn't revealed by the number of mortgage applications that are being made because so many investors are paying cash.

He said that the recovery will be driven by investors, primarily in lower-cost markets, and that's why the true state of the market isn't revealed by the number of mortgage applications that are being made because so many investors are paying cash. Other 4th quarter highlights:

  • House prices in 70 (18 percent) of the areas tracked by Fiserv, were unchanged or had increased compared to the fourth quarter of 2010.
  • In 122 metro areas (32 percent) of the markets price declines were under two percent.
  • In half the metro areas (191), including Atlanta (-12.8 percent), Reno, Nev. (-10.8 percent) and Tucson, Ariz. (-10 percent), prices dropped by more than two percent.
  • The average price of a U.S. single-family home fell to a new post-bubble low, declining 4 percent from the year-ago period.
  • Fiserv Case-Shiller projects a further modest decline of 0.8 percent by the end of 2012. \
  • Markets rebounding off very large price declines include Detroit, Mich. (9.8 percent), Cape Coral, Fla. (3.5 percent) and Port St. Lucie, Fla. (1.1 percent).