There's good news and bad news in the Twin Cities' August home sales report.

Pending sales in the metro area improved for the second month in a row. But with foreclosure sales on the rise, there's been steady downward pressure on the median sale price.

The Minneapolis Area Association of Realtors reported Wednesday that closed home sales in August declined 4.3 percent over the same period last year. But pending sales -- signed purchase agreements for sales not yet closed -- increased 15 percent, the largest year-over-year rise since November 2004. July's pending sales were up 6 percent.

Some sales agents hailed the latest report as more good news for a beleaguered housing market. But others say the increase in signed purchase agreements was prompted in part by termination of a popular no-money-down mortgage program that ended in August.

Tom Musil, director of the Shenehon Center for Real Estate in the Opus College of Business at the University of St. Thomas, said that although the report offers some reason to be hopeful, he's reluctant to read much into it because sale prices continue to decline.

"Things are turning around, but it's hard to say if it's a bottom," Musil said.

Analysts say no one will know that the market has hit bottom until the recovery occurs. Most agree that a recovery will happen only after buyers burn through record levels of unsold homes. Although new listings are beginning to decline, bank-owned listings and distress sales continue to clog the market.

New listings in August declined 18.8 percent, causing the total number of active listings on the market to fall 9 percent.

That leaves the overall supply of homes for sale this month at just under 10 months -- a slight decline from earlier this summer.

The median sale price of houses sold through the Regional Multiple Listing Service fell 13 percent last month to $200,000. The median is the point at which half sold for more, half for less. The median sale price of lender-mediated sales was down almost 10 percent, while the median sale price of traditional sales fell only 4 percent.

Kevin Knudsen, association president and a branch vice president for Coldwell Banker Burnet, said that while it's too soon to quantify, it appears that the market got a boost from the home buyer tax-credit program announced earlier this year.

This week, prospective buyers got good news from the U.S. Treasury when it announced a bailout of mortgage giants Fannie Mae and Freddie Mac, which caused mortgage interest rates to dip about half a percentage point.

Alex Stenback, mortgage banker with Residential Mortgage Group in Minnetonka, said that a 30-year fixed-rate mortgage could be had by borrowers with 20 percent down and good credit for 5.75 to 5.875 percent at the close of business Wednesday.

While helpful for borrowers, the falling rates aren't likely to rescue the market, Stenback said. That's because access to credit continues to tighten and downpayment standards are rising.

"This drop in rates, if it holds or even drops further, will not in itself be a game-changer for the local real estate market," he said.

"The number of people that have the credit, equity/down payment, and capacity to take advantage of the lower rates will continue to shrink."

Keith Gumbinger of HSH Associates in Butler, N.J., said that, while rates took a significant dip, they're about midway between the January low-water mark when interest rates dipped to 5.16 percent and the peak in July of 6.69 percent.

Jim Buchta • 612-673-7376