Prices on distressed sales in the Twin Cities have fallen three times more than prices on traditional deals in the past few years, a report revealed Monday, underscoring the impact foreclosures and short sales have had on the local market. Since 2005, the height of the housing price bubble, the median price of homes sold through traditional transactions fell 9.5 percent, according to the St. Thomas Residential Real Estate Price Report Index. Meanwhile, short sale prices declined 29 percent and foreclosure prices fell 38 percent. The University of St. Thomas developed its index to get a better feel of the local market. National surveys like the monthly Standard & Poor’s Home Price Index don’t break out data by sale type. “Combining foreclosure and short sales of real estate with traditional property sales skews any single, composite price index, such as Case-Shiller’s, and creates a downward bias when foreclosure sales and short sales represent a significant part of total housing sales,” said Herb Tousley, director of real estate programs at St. Thomas. The index is calculated using nine kinds of data from the Minneapolis Area Association of Realtors, which also produces its own monthly sales report. With foreclosures and short sales continuing to represent a significant number of sales, economists and market watchers are trying to pay more attention to the difference between sale prices of houses when the seller is a bank versus a traditional seller. Clearly, the motivation of a lender is different than that of a private party, and there’s growing evidence that over the long term, prices on traditional listings are holding their value more than deals that involve a lender. That wasn’t the case on a month-to-month basis. From August to September, prices on traditional listings fell 4.6 percent to $186,000. Short sale prices were down only 1 percent to $129,900. And foreclosure prices actually rose 6.7 percent to $103,400. Those distressed sales represented a quarter of all sales last month. In a normal market, only 6 percent of all sales would be foreclosures or shorts.