Twin Cities home prices up 1.8%

The September increase led an index of 20 metro areas across the country.

By STEVE ALEXANDER, Star Tribune

Last update: November 24, 2009 - 8:58 PM

Home prices in the Twin Cities area increased 1.8 percent in September, but it's too early to say whether the rally will continue, according to a closely watched national housing report.

Minneapolis-St. Paul and Detroit led 20 U.S. metro areas in September home price improvements, both with 1.8 percent, according to the Case-Shiller home price index compiled by Standard & Poor's.

But the better-than-average home price increases in the Twin Cities are occurring only after a steep price decline of 11.2 percent in the past year. Minneapolis-St. Paul was one of nine metro areas in the survey that have seen double-digit declines since September 2008.

Nevertheless, the Builders Association of the Twin Cities issued a statement that said the report "is another indicator that the housing market is improving and, in fact, is much better than it has been pictured during the past few months."

National home prices, tracked by quarter rather than by month, were up 3.1 percent for the three months ended in September and are at the same level as they were in the fall of 2003, the report showed.

David Blitzer, chairman of the committee overseeing the Case-Shiller index, said that despite the similar home price gains in the Twin Cities and Detroit, the housing situation in the two areas is much different.

"The Minneapolis housing market has been a bit more volatile than average in the last six to eight months," Blitzer said. "But I wouldn't group it with Detroit, where the home price situation is horrendous and you've had the demise of the American auto industry."

The report also raised questions about whether the recovery in home prices has slowed. On average, home prices in the 20 cities rose only 0.3 percent in September, compared with rising 1.2 percent in August. The study tracks sales of existing single-family houses.

Blitzer said the slowdown in price increases is a bit more than can be explained by normal seasonal variation in home prices.

"It's not enough to get panicky about, but September was not quite as a strong as August," Blitzer said. "We had nine of the 20 cities with home price increases in September, but 17 cities in August. So things are a little bit softer than they were, but it will take three to four months before we get a clear sense of whether this is a trend."

Future home price increases will depend on the number of foreclosures, the unemployment rate and the general performance of the economy, Blitzer said.

Las Vegas remained the most depressed housing market, the report said. Home prices there have declined for 37 consecutive months.

Las Vegas is worse off than other metro areas "because there was a lot of empty land and they went crazy building houses," Blitzer said.

Steve Alexander • 612-673-4553