The Twin Cities of Minneapolis and St. Paul saw September home sales jump 11% over year ago levels while prices shot up 12.3%, the Minneapolis Area Association of Realtors said. 

The median sales price in the region, which covers 13 counties, hit $174,000 as 4,032 homes ended up under contract.

While the news is generally good news, the association partly attributes rising prices to less inventory. Apparently, sellers delivered only 5,341 for-sale properties, a 4.1% drop from year ago levels.

In addition, the number of homes for sale fell to a 9-year low of 15,996 properties, suggesting sellers are not as optimistic as Twin Cities buyers.

Distressed sales in the market sold at a 26.6% discount on average, while the overall median sales price rose 12.3%. Home prices on traditional homes also rose 6.2% to $207,000 while foreclosures rose 13.7% to $125,000.

"Interest rates in the Twin Cities are around 3.4% and buyers have a justified sense of urgency," said Andy Fazendin, MAAR president-elect. "Housing has gone from a laggard the past few years to leading the charge in 2012."