U.S. home prices fell 1.3 percent in the fourth quarter, according to a government price index that excludes more expensive homes.

The fourth-quarter price declines erased previous gains for the year and left home prices down 2.4 percent from their April 2007 peak, according to a house-price index published by the Office of Federal Housing Enterprise Oversight (OFHEO).

OFHEO’s national purchase-only house-price index fell 0.3 percent between the fourth quarters of 2006 and 2007, but prices of other goods and services rose 4.3 percent, meaning average home prices fell 4.6 percent in real terms. It was the first four-quarter decline in OFHEO’s index since its inception in 1991.

“While the declines are significant and quite large in some areas, the market still needs to work through its overhang of unsold inventory,” said OFHEO Chief Economist Patrick Lawler in a statement. “How much further down that inventory will ultimately push prices will depend on a number of factors, including what happens to interest rates and the overall health of the U.S. economy.”

Another index published today by Standard & Poor’s estimated national home prices were down a record 8.9 percent in the fourth quarter from a year ago (see Inman News story).

OFHEO recognizes that its index can mask the true extent of price declines because it relies on data from Fannie Mae and Freddie Mac to calculate average prices from repeat sales of homes with conforming mortgages of $417,000 or less. The credit crunch has made nonconforming mortgages more expensive and harder to obtain.

Nevertheless, OFHEO’s index showed prices falling in every state but Maine during the fourth quarter. Only 16 states and Washington, D.C., experienced price declines for the full year.

States with the greatest year-over-year price declines were California (-6.6 percent), followed by Nevada (-5.9 percent), Florida (-4.7 percent), Michigan (-4.3 percent), and Rhode Island (-2.6 percent). Annual price appreciation was greatest in less populated, largely rural states, including Utah (9.3 percent), Wyoming (8.3 percent), North Dakota (7.9 percent), Montana (6.9 percent), and Alaska (6 percent).

Among 291 ranked metropolitan statistical areas (MSAs), 99 had annual price declines and 116 saw prices fall from quarter-to-quarter. In tracking price changes at the MSA level, in addition to sales of homes, OFHEO also includes appraisals that are conducted when homeowners refinance their loans.

Of the 20 MSAs with the largest year-over-year price declines, 18 were in California and Florida (Reno-Sparks, Nev., and Ann Arbor, Mich. were the exceptions).

Merced, Calif., saw the greatest annual price decline among 291 ranked MSAs (-18.98 percent) followed by Stockton, Calif. (-15.48 percent); Port St. Lucie, Fla. (-14.45 percent); Punta Gorda, Fla. (13.30 percent); Salinas, Calif. (-12.93 percent); Cape-Coral-Ft. Myers Fla. (-12.37 percent); Bradenton-Sarasota-Venice, Fla. (-12.35 percent), Naples-Marco Island, Fla. (-12.21 percent); Santa Barbara-Santa Maria-Goleta, Calif. (-11.94 percent); and Palm Bay-Melbourne-Titusville Fla. (-11.36 percent).

The 10 MSAs with the greatest annual price appreciation were Wanatchee, Wash. (13.67 percent); Houma-Bayou Cane-Thibodaux, La. (12.15 percent); Grand Junction, Colo. (12.03 percent); Ogden-Clearfield, Utah (10.80 percent); Bismark, N.D. (10.72 percent); Provo-Orem Utah (10.46 percent); Salt Lake City, Utah (9.68 percent); Logan, Utah (8.75 percent); Idaho Falls, Idaho (8.58 percent); and San Antonio, Texas (8.25 percent).

Top 20 declining markets

Source: Office of Federal Housing Enterprise Oversight

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