Home prices are under assault, and a flurry of reports released this past week suggest the pain will last longer than expected.

The widely watched Case Shiller analysis said that while the home price index rose 1.7 percent nationwide during August -- largely from an afterglow of expired federal tax credits -- rising inventory levels caused the market this summer to slip. Meanwhile, pending sales have dropped, while distressed sales -- foreclosures and short sales -- have increased.

That means more markdowns.

Falling home values have weighed heavily on consumer confidence. Homeowners who once thought they'd send their kids to college or retire on the equity they once had in their houses are now worried it's all evaporated. Price drops have forced many into foreclosure or short sales that have ruined their credit and can haunt their finances for years to come. Others feel stuck in their homes, unable to sell their current one at a reasonable price.

All of which weighs heavily on the economy.

Previously, the consensus among many housing experts was that the housing market would recover during 2011, but prospects for improvement now seem farther down the road.

The latest assessment of the market comes from 109 economists and housing analysts polled this month by MacroMarkets, a housing-futures firm, for the Wall Street Journal. About half expect home prices to bottom next year and rebound in 2012, in large part because inventories of unsold homes are rising in much of the country.

Still, low prices are good for buyers, who have been few and far between since federal tax credits expired in April, despite record low mortgage rates. "Buyers are still being highly cautious," said Jennifer Olstad, a real estate investor, who notes she's benefited when buying properties. But lower prices could hurt investors such as herself on the resale side, especially since the few buyers who are out there aren't afraid to make lowball offers.

According to the latest monthly data from the Minneapolis Area Association of Realtors, the median price of closed sales during September was $166,000, down 2.4 percent from last year and down 12.6 percent compared with 2008. That's down from a high of about $237,000 in June 2006.

Piling up

The inventory of unsold homes continues to rise, further pressuring prices. The number of houses on the market in the Twin Cities metro area rose during September even as new listings slowed, a trend that has continued into October.

That mirrors a national trend of rising inventory. A third-quarter survey of housing-market conditions in 28 major metropolitan areas showed inventories of unsold homes were up in 19 markets compared with a year ago. The Twin Cities had the 10th-biggest increase in inventory for the quarter.

The Twin Cities also has become the markdown capital of the nation.

In fact, according to a survey by trulia.com, sellers in Minneapolis are more likely than anywhere else in the nation to offer a price reduction on their house.

As of Oct. 11, 44 percent of all home sellers in Minneapolis offered at least one price reduction, well above the national average of 27 percent. Locally, the average price reduction was 11 percent.

It was the sixth straight month that Minneapolis topped the list.

Olstad, the Maple Grove-based real estate investor, said that in today's market a markdown is one of the few ways to attract attention, but sometimes even that doesn't work.

She said that since the expiration of the tax credit, finding buyers has been difficult. She recently dropped the price on a completely renovated two-bedroom house in north Minneapolis but still didn't get any calls.

Still, she's looking forward and is optimistic completion of the midterm elections will provide prospective buyers a bit more confidence.

"I think once there is certainty around who will be in office, things may pick up," she said. "I hope so."

Jim Buchta • 612-673-7376