It’s become a broken record of late: Home-price declines breaking records. With the economy on the skids and the subprime crisis still unfolding, home values are getting devoured first. This morning the S&P/Case-Shiller home-price index was released, revealing that the trend doesn’t show any signs of slowing down. The 20-city index showed year-to-year August price declines of 16.6 percent. Minneapolis saw a drop of 13.3 percent over the year period, with a 1 percent decline from July to August.

Recent reports indicate that home sales are up, a possible sign of a turnaround, some analysts say. But trusting in that marker is like Greenspan relying on capitalism or ghosts relying on astrology–it’s meaningless and totally futile. Home sales are up as a result of the sharp increase in foreclosures and short sales, a bad sign for homeowners and an already shaky economy. In fact, according to the most recent report from the Minneapolis Area Association of Realtors, the inventory of foreclosures and short sales–property sold for below its current loan value– has increased more than 64 percent of the past year. Of the current homes for sale in the Twin Cities, nearly 30 percent are foreclosures or short sales.

The hardest hit neighborhood in Minneapolis is on the Northside, where lender-mediated sales (short sales and foreclosures) account for 69 percent of the inventory of homes for sale in October. Powderhorn is a close second with nearly 52 percent. And the suburbs aren’t immune to the growing problem. Foreclosures and short sales make up more than 63 percent of all the October homes sales in Brooklyn Center.

In St. Paul, the Central neighborhood’s current home sales are more than 63 percent lender-mediated, while Phalen’s foreclosures and short sales have risen to 60 percent this month.

Minneapolis saw a slight increase in home prices from June of this year to July, with values rising by 1.3 percent. Yet the small uptick doesn’t portend a turnaround just yet: Home prices in the Twin Cities generally peak in summer months. Minneapolis’ home-price index is currently at 143.43, according to the report, down from its height of 170.34 in November of 2005.

Home prices from September 2007 through August 2008 in the Twin Cities are down 7.6 percent, according to the Minneapolis Area Association of Realtors, dropping from an average price of $274,870 for a single-family home to $254,028. Currently the Twin Cities have 9.9-month supply of homes on the market, a saturartion that hasn’t budged since last year. And condominiums are sitting on the market longer these days, increasing from a 10.8-month supply last year to taking more than a year on average to sell.

The good news in all of this? If you’re a buyer, the number of homes for sale under $120,000 has increased by 104 percent since last year. That’s positive news for affordable housing, which Minneapolis has been seriously deficient in for more than a decade. But it’s bad news for the hundreds of thousands of homeowners in the Twin Cities who are seeing their equity whittle away in the face of the housing crash and as foreclosures increase all around them.