The rate of decline in U.S. home prices slowed during the second quarter, but the 4.8 percent year-over-year drop in a house-price index that relies on data from Fannie Mae and Freddie Mac was the largest in the index’s 17-year history.

The Office of Federal Housing Enterprise Oversight’s national purchase-only house-price index showed prices falling a seasonally adjusted 1.4 percent during the second quarter, compared with 1.7 percent in the first quarter.

Looking back a year, the purchase-only house-price index fell 4.8 percent. An OFHEO index that includes not only sales of homes, but valuations conducted when homeowners refinance their loans, showed prices down 1.7 percent from a year ago.

With the price of other goods and services increasing by 5.3 percent over the last year, the purchase-only index shows national home prices falling approximately 10.1 percent in real terms, OFHEO said. The all-transactions index, which includes refinancings, showed a 7 percent decline in real terms.

OFHEO says the indexes can understate both price declines and gains in some markets, in part because they do not include mortgages too large or risky to be purchased or guaranteed by Fannie Mae and Freddie Mac. But the indexes provide insight into trends at the state and metropolitan statistical (MSA) level. According to the all-transactions index, during the second quarter, home prices fell in 207 of 292 ranked MSAs.

With the exception of Las Vegas, the 20 hardest-hit MSAs were in California and Florida. Six California MSAs saw double-digit price declines during the quarter — Merced (-15.9 percent), Stockton (-14.3 percent), Modesto (-12.3 percent), Salinas (-11.9 percent), Vallejo-Fairfield (-11.8 percent), and Riverside-San Bernardino-Ontario (-11.1 percent).

The six hardest-hit markets saw one-year price declines of more than 20 percent, with prices down 34.5 percent in Merced and 31.7 percent in Stockton.

The all-transactions index shows the five states with the sharpest year-over-year depreciation were California (-15.8 percent), Nevada (-14.1 percent), Florida (-12.4 percent), Arizona (-9.2 percent), and Rhode Island (-4.8 percent).

"The most overbuilt areas of the country — including California, Nevada, Arizona and Florida — contrast greatly with most other states, where prices are declining more moderately or even increasing," said OFHEO Chief Economist Patrick Lawler in a press release. "Nationally, the substantial declines in the weakest markets have driven seasonally adjusted prices down to late-2005 levels."

Despite recent declines in some markets, the majority of MSAs are still showing positive growth over four quarters. The MSAs with the greatest appreciation over the past year were Houma-Bayou Cane-Thibodaux, La. (9.1 percent), Decatur, Ala. (6.4 percent), and Charleston, W.Va. (6 percent).

The five states with the greatest price appreciation between the second quarters of 2007 and 2008 were: Oklahoma (4.9 percent), Wyoming (4.4 percent), South Dakota (3.8 percent), North Carolina (3.6 percent), and North Dakota (3.6 percent).


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