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According to a report released Thursday from the Office of Federal Housing Enterprise Oversight - U.S. home prices fell a seasonally adjusted 1.7% in the first quarter of fiscal ‘08.

This was the largest quarterly price decline on record and exceeds the 1.4 percent price decline between the third and fourth quarters of fiscal ‘07.

Prices fell in 43 states and were down 3.1% between the first quarter of 2007 and the first quarter of 2008. Eight states exhibited quarterly price declines of more than 3 percent and two
states - California and Nevada - saw prices decline more than 8 percent.

All the figures and the average rates of decline are based on OFHEO’s seasonally-adjusted purchase-only house price index which tracks average house price changes in repeat sales or refinancings of the same single-family properties.

“These substantial home price declines bring positive and negative news,” OFHEO Director James B. Lockhart said. “For homeowners and financial market observers, these declines spell further erosion in home equity levels and potentially more trouble for mortgage markets. To prospective home buyers who have been shut out of homeownership because of affordability constraints, these declines may be welcome news, as are continued low mortgage rates.”

On Wednesday, trade groups representing realtors and architects reported that commercial real-estate markets should weaken in the months ahead.

Over the last four months, the annualized rate of home sales has been running at an average of 4.94 million units. A number that remains relatively close to this figure following the next report - will contribute to the view that the housing market is showing signs of stabilization - granted, at very weak levels.

Source: Home Prices Continue to Decline