Home prices in the Twin Cities rose just slightly in August, but prices fell more than 8 percent from last year, raising questions about the market's stability.

The S&P/Case-Shiller home price index showed that half of the 20 cities it tracks had month-to-month increases in August, including the Twin Cities, which saw a 0.4 percent jump. While the July to August increase was much smaller than the one before it, the results are not surprising given that the area's prices tend to rise through the summer then trail off in the fall and winter.

But the area's yearly decline of 8.5 percent was confusing, experts say, and underscore continuing volatility. While a smaller drop than in the past, it was the biggest year-over-year decline among the 20 regions the report tracks.

Case-Shiller's David Blitzer was at a loss to explain why a region with an economy that is much healthier than others would see such relatively large price drops, but he was optimistic because the annual declines are getting smaller.

"We cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing," said Blitzer, chairman of the index committee at S&P Indices. "With 16 of 20 cities and both composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data."

Local market watchers say the Twin Cities was up against an unusual comparison. Last year there were fewer foreclosure sales in the months following the expiration of the federal home buyer's tax credit, which would have given home prices a boost. But in recent months, foreclosure sales have been particularly strong, causing steep annual price declines because foreclosures depress home values.

And at time when the number of transactions is much smaller than it was last year, there could be some statistical noise in the data.

While the index is still down significantly compared with last year in the Twin Cities, those declines have gotten smaller over the past three months, a sign that the market isn't getting worse. Only two cities in the index, Detroit and Washington, D.C., showed positive annual returns, but they were modest.

When seasonally adjusted, the Twin Cities index has been relatively stable over the course of the year. From February through August of this year, the index for the Twin Cities was down only 0.1 percent, the sixth-best ranking among the 20 areas tracked by the report.

Such statistical ups and downs are what economists call an "uneven recovery," and while there's no conclusive evidence that the market has hit bottom, there are signs that prices are beginning to level.

Jim Buchta • 612-673-7376