Home price gains in the Twin Cities were the second-best in the nation in September, continuing a steady string of strong annual increases that are bolstering confidence in the housing recovery.
Prices in the Twin Cities metro rose 8.8 percent compared with last year, outpacing the 3 percent gain among 20 other major cities across the country, according to the latest Standard & Poor's Case-Shiller home price index.
The report is further evidence that a housing recovery is underway, though its speed and consistency continue to be debated and it is uneven geographically. In the Twin Cities and beyond, home sales are getting a boost from record-low mortgage rates, an improving economy and growing confidence that the worst is over.
"With six months of consistently rising home prices, it is safe to say that we are now in the midst of a recovery in the housing market," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
And prices are just one component of that recovery.
Last week, the Minneapolis Area Association of Realtors said home sales climbed almost 10 percent from the previous year, following several months of similar double-digit gains. Meanwhile, the number of new listings is falling, causing overall inventory to sink almost 30 percent.
"The strength of the market has really surprised everybody," said Aaron Dickinson, a sales agent with Edina Realty. "Our supply has tightened so much, it's just unbelievable."
Some of the gains reported in the Case-Shiller report are related to the seasonal nature of the market. Prices and sales typically slow toward the end of the year, but when adjusted for seasonality, the Twin Cities index was up 1 percent from August to September compared with a 0.4 percent increase for the 20 major cities.
An increasing number of metro areas are posting annual price gains, but there are still some markets where the recovery is slower. During September, Chicago and New York had slight declines. The biggest gain was in the Phoenix area, where the index was up 20.4 percent.
Case-Shiller tracks repeat sales of the same single-family houses and excludes condos and foreclosure sales. Fans of the methodology say this cuts out the statistical drag that such distressed sales can have on prices. By contrast, local Realtors associations base their assessment on all sales that happen during the month.
In the Twin Cities, there has also been a dramatic shift in the health of the market. As foreclosure transactions decline, traditional sales are rising, which is lifting home prices. This is leading to an increase in the number of buyers who are able to trade up to more expensive houses.
Blitzer said the strength of the gains in the Twin Cities during September is also a reflection of how much prices had fallen during the past year. For several months, the Twin Cities posted some of the biggest price declines in the nation, so recent increases have been correspondingly strong. During the history of the report, prices in the Twin Cities have tended to be more volatile than larger cities because the sample size is smaller, Blitzer said.
Aside from those statistical anomalies, other measures point to better times ahead for sellers. During October, for example, the average selling time had fallen from 138 days on the market to 103 days, a 25 percent decline.
"We're getting back to the 2005 era where buyers have to be on top of things if they want to pick up a property that's competitively priced," said Dickinson. "It's pleasant to see a variety of metrics for home prices showing improvement."
Jim Buchta 612-673-7376