Nationwide home prices are down a record 3.1 percent from a year ago, according to a government house-price index that excludes mortgages too large or risky for purchase or guarantee by Fannie Mae and Freddie Mac and may understate price declines in some markets.

Nationwide home prices are down a record 3.1 percent from a year ago, according to a government house-price index that excludes mortgages too large or risky for purchase or guarantee by Fannie Mae and Freddie Mac and may understate price declines in some markets.

The Office of Federal Housing Enterprise Oversight said its seasonally adjusted purchase-only house-price index fell by 1.7 percent during the first quarter, and is down 3.7 percent since national home prices hit an April 2007 peak.

The 3.1 percent year-over year decline is the largest in the 17-year history of the index, OFHEO said. When inflation is factored in, the price declines are even more severe. With inflation running at 4.6 percent between the first quarters of 2007 and 2008, the 3.1 percent decline in the purchase-only index translates into an inflation-adjusted 7.7 percent.

The purchase-only index, which is based on 5 million repeat sales transactions, showed prices falling in 43 states from the previous quarter. California and Nevada saw price declines of more than 8 percent, and six other states saw prices fall more than 3 percent.

The price declines — which OFHEO acknowledges are "more muted" than some other house-price indexes that analyze other data in different ways — are a potential problem for lenders facing mounting losses from delinquencies and foreclosures, but could be good news for bargain-hunters.

"For homeowners and financial market observers, these declines spell further erosion in home-equity levels and potentially more trouble for mortgage markets," said OFHEO Director James Lockhart in a statement. "To prospective home buyers who have been shut out of home ownership because of affordability constraints, these declines may be welcome news, as are continued low mortgage rates."

Looking back one year, OFHEO’s all-transaction index showed the five states with the greatest price declines were California (-10.6 percent), Nevada (-10.3 percent), Florida (-8.1 percent), Arizona (-5.5 percent) and Michigan (-3.1 percent).

The states with the greatest price appreciation over the previous 12 months were Wyoming (6.3 percent), Utah (5.6 percent), Montana (4.9 percent), Texas (4.7 percent) and Alabama (4.5 percent).

With the exception of Las Vegas-Paradise, Nev., the 20 cities with the greatest year-over-year price declines were all in California and Florida. The three hardest-hit metropolitan statistical areas were in California: Merced (-24.7 percent), Stockton (-21.5 percent), and Modesto (-21 percent).

Of the 292 cities on OFHEO’s list of ranked MSAs, however, 164 saw some price appreciation in the last 12 months. Houma-Bayou, La., had the greatest year-over-year price appreciation (11.2 percent), followed by 9.1 percent for Grand Junction, Colo., and 8 percent for Wenatchee, Wash.

The all-transaction index, which also includes loan refinancings and is based on 35 million repeat transactions, was down 0.2 percent for the quarter and was flat for the year.

Some other indexes, such as the Case-Shiller indexes, have shown more severe declines in some markets because they use different methods to analyze other data.

OFHEO, which is charged with overseeing the safety and soundness of Fannie Mae and Freddie Mac, looks at repeat transactions involving conforming, conventional mortgages purchased or guaranteed by the government-chartered companies.

Homes financed with prime, conforming mortgages "continue to hold up better than those financed with other types of mortgages, a phenomenon we’ve been observing for the last several quarters," Lockhart said.

The OFHEO indexes also don’t look at transactions involving many higher-priced homes, because Fannie and Freddie are limited to purchasing mortgages no larger than $417,000 in most markets.

In some high-cost areas, Fannie and Freddie are now being allowed to purchase or guarantee loans of up to $729,750, but did not begin doing so until April. The OFHEO indexes released today covered January through March.

The S&P/Case-Schiller indexes use information from county assessor and recorder officers, and are value-weighted so that price trends for expensive homes have a greater influence on the indexes.

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