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Decline In House Prices Accelerates in First Quarter

May 22, 2008

Washington, DC – U.S. home prices fell in the first quarter of 2008 according to OFHEO’s seasonally-adjusted purchase-only house price index. The index, which is based on data from home sales, was 1.7 percent lower on a seasonally-adjusted basis in the first quarter than in the fourth quarter of 2007. This decline exceeded the 1.4 percent price decline between the third and fourth quarters of 2007 and is the largest quarterly price decline on record. Over the past year, prices fell 3.1 percent between the first quarter of 2007 and the first quarter of 2008. This is the largest decline in the purchaseonly index’s 17-year history.

OFHEO’s all-transactions House Price Index (HPI), which includes data from home sales and appraisals for refinancings, showed less weakness than the purchase-only index. The all-transactions HPI fell 0.2 percent in the latest quarter and was flat over the four-quarter period.

The figures were released today by OFHEO Director James B. Lockhart, as part of the quarterly report analyzing housing price appreciation trends. “These substantial home price declines bring positive and negative news,” said Lockhart. “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.”

Both OFHEO’s purchase-only index and its all-transactions index show much more muted price declines than do other house price indexes. “While house price declines are widespread, 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.

With this release, OFHEO continues its publication of its monthly price index, which was introduced in February. Monthly price trends are shown on pages 8 and 9 and are provided for months through March. Between February and March, prices fell 0.4 percent nationally on a seasonally-adjusted basis, and they have fallen a total of 3.7 percent since their April 2007 peak.

While the national purchase-only house price index fell 3.1 percent between the first quarters of 2007 and 2008, prices of other goods and services rose 4.6 percent. Accordingly, the inflation-adjusted price of homes fell 7.7 percent over the latest year. “The large overhang of real estate inventory awaiting sale continues to force price declines in many areas, but particularly in places that had seen very sharp appreciation in previous periods," said OFHEO Chief Economist Patrick Lawler.

Significant Findings:

Purchase-only Index:

  • Prices fell in the latest quarter in 43 states.
  • Eight states exhibited quarterly price declines of more than 3 percent and two states -- California and Nevada --saw prices decline more than 8 percent.
  • Every Census Division experienced a price decline in the latest quarter. Prices were weakest in the Pacific Census Division, which experienced a 5.9 percent price decline in the quarter.

All- transactions HPI:

  • The states with the greatest price appreciation between the first quarter of 2007 and the first quarter of 2008 were: Wyoming (6.3%), Utah (5.6%), Montana (4.9%), Texas (4.7%), and Alabama (4.5%). The states with the sharpest depreciation for the same period were: California (-10.6%), Nevada (-10.3%), Florida (-8.1%), Arizona (-5.5%), and Michigan (-3.1%).
  • Of the 20 ranked cities with the greatest price declines over the latest four quarters, all but one (Las Vegas-Paradise, Nevada) were in California or Florida.
  • The Metropolitan Statistical Areas (MSAs) with the greatest price appreciation between the first quarter of 2007 and the first quarter of 2008 were: Houma- Bayou, Louisiana (11.2%), Grand Junction, Colorado (9.1%), and Wenatchee, Washington (8.0%). The MSAs with the sharpest depreciation for the same period were: Merced (-24.7%), Stockton (-21.5%), and Modesto (-21.0%), all in California.
  • Of the 292 cities on OFHEO’s list of “ranked” MSAs, 164 had positive quarterly appreciation and 128 had price declines.

Highlights/Technical Note

This quarter’s report includes a technical note addressing OFHEO’s plans to regularly update its analysis of differences between the OFHEO HPI and the S&P/Case Shiller® Home Price Indices.

OFHEO’s full PDF of report is at: Also, be sure to visit to use the OFHEO House Price calculator.

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