MANKATO — In the past year, home prices in the Mankato area have increased faster than almost anywhere in the nation.

Home sales prices rose 3.7 percent in the Mankato-North Mankato Metropolitan Statistical area, which includes all of Blue Earth and Nicollet counties. That ranks Mankato as having the 14th highest sales price increase out of about 300 metropolitan statistical areas in the country in the past year.

“It shows our market is turning around a little in prices and number of sales,” said Jeff Kaul, a Realtor with Century 21 Atwood Realty in Mankato and president of the Realtors Association of Southern Minnesota.

“It’s not a rapid pace, but the pace is going up. Particularly the first-time homeowner market — that’s where the strength is.”

The sales price increase report comes from the Federal Housing Administration.      

While the Mankato region saw a nearly 4 percent increase in prices in the past year, prices are still 9 percent below what they were five years ago.

That’s far better than many cities that have seen higher increases in prices in the past year, but have much steeper drops over the past five years. Phoenix-Mesa, for example, had the biggest one-year home price increase in the past year at 6 percent. But their home prices are still 47 percent lower than they were five years ago.

“We have not taken real hits here,” Kaul said. “People from other parts of the country come here and are surprised we haven’t taken much of a hit (in prices).”

In the immediate Mankato-North Mankato area, the median sales price of all homes sold in recent months has moved up to about $170,000.

For the entire 10-county area of south-central Minnesota covered by the local Realtors Association, median prices were $125,000 in August and $142,000 in July.

Kaul said higher-priced homes remain a tough sell. “People moving up to more expensive houses, that’s still lagging.

“On high-end houses, there’s real low offers coming in. There are some sales, but the sales prices are down considerably. The higher the price, the harder it is to get close to your list price.”

Kaul said the number of foreclosure homes coming on the market has leveled off. “We’re not seeing as many foreclosures hitting the market as there were in the last three or four years.”

Short sales, however, have increased. “It may be the lenders saying, ‘We don’t like the foreclosure process; we may all be better off doing a short sale,’ ” Kaul said.

For a short sale to happen, the owner first has to owe more on the house than it’s going to bring at sale. For the bank to agree to a short sale, the homeowner must be in a financial hardship, such as being slow on or missing payments or able to demonstrate they won’t be able to keep up with payments.

If the lender agrees, a broker does a price opinion and puts the home on the market for what they think it would sell for. If someone makes an offer lower than the asking price, the lender decides if it is acceptable.

“The lenders decide how much they’re willing to lose,” Kaul said.