After nearly two years of declines, home prices in the Twin Cities and around the country appear to be stabilizing. But without government support, some question whether recent gains will continue.

Twin Cities-area home prices declined slightly in November, as cold weather set in and the government announced that tax credits for home buyers would be extended into 2010. Locally, prices in November dropped 0.5 percent from October, according to the widely watched S&P/Case-Shiller home price index released Tuesday.

Prices in the 20 housing markets tracked by the composite index dropped 0.2 percent.

Although the Minneapolis-St. Paul area had month-over-month price increases during the summer months and the market appears to have stabilized, prices are down 6.8 percent year-over-year and 27.2 percent from the September 2006 high.

Nationwide, prices were 5.3 percent lower in November than they were a year ago. Analysts note that even that is an improvement. Month-over-month results have tapered from a stream of double-digit declines to November's 0.2 percent. Four markets -- Dallas, Denver, San Diego and San Francisco -- saw prices rise slightly in 2009.

When adjusted for seasonality, prices in November rose in the Twin Cities area by 0.3 percent and 0.2 percent nationwide.

Still, economists are hesitant to declare that good times are here.

"The latest data show a far more mixed picture when you look at other details," Standard & Poor's Chairman David Blitzer stated, citing how just five of the 20 markets experienced price increases in November.

For prices to increase, we need to "work through those gimmick mortgages," said Tom Musil, a real estate professor at the University of St. Thomas.

Many of these loans, with interest-only payments or other bells and whistles, are set to adjust in the next couple of years. Economists predict the resulting higher mortgage payments could propel more homeowners into foreclosure.

The jobs picture is also of concern, Musil said. But he thinks the government will inject further stimulus into the housing market this spring by extending the home buyer's tax credit a second time in an attempt to stabilize and possibly boost prices.

Patrick Newport, economist for IHS Global Insight, expects foreclosures to continue and interest rates to rise if the Fed stops buying mortgages securities as planned.

For more than a year, the government has been the major buyer of mortgage-backed securities, single-handedly propping up the dried-up market. But the government announced that it would stop purchasing them in March. "We believe that prices have further to fall -- about another 5 percent," Newport said.

Kara McGuire • 612-673-7293