Government index reports smallest quarterly increase in home prices in nearly 13 years

WASHINGTON – Aug. 31, 2007 – Compared with the first quarter, U.S. home prices rose in the second quarter at the slowest pace in nearly 13 years, according to government data that provides fresh evidence of the housing market’s problems.

The Office of Federal Housing Enterprise Oversight (OFHEO) on Thursday said in its quarterly report on the housing market that nationwide home prices grew 0.1 percent from the first quarter to the second quarter.

The agency’s index of U.S home prices grew 3.2 percent in the second quarter from year-ago levels, the smallest year-over year price growth in 10 years.

“House prices were basically flat in the second quarter despite tightening credit policies, rising foreclosure rates and weakening buyer sentiment,” OFHEO Director James B. Lockhart said in a statement. “Significant price declines appear localized in areas with weak economies or where price increases were particularly dramatic during the housing boom.”

Nevada, Michigan, California, Massachusetts and Rhode Island all experienced price drops from year-ago levels. Nevada’s decline was the largest at 1.5 percent.

Still, there were significant year-over year price increases in Utah, Wyoming, Montana, New Mexico and Washington state, the report said. Utah had a 15.3 percent increase, while Wyoming had a 12.8 percent price increase.

OFHEO’s index is calculated based solely on loans purchased or turned into mortgage securities by the government-sponsored mortgage giants, Fannie Mae and Freddie Mac, which make up about two-thirds of the U.S. home mortgage market.

Other reports have come up with different readings of the housing market.

The Standard & Poor’s/Case-Schiller quarterly index, which tracks price trends among existing single-family homes across the nation compared with a year earlier, on Tuesday found that U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since S&P began its nationwide housing index in 1987.

The National Association of Realtors projects median nationwide existing-home prices will fall by 1.2 percent to a median of $219,300 this year and forecasts sales will fall 6.8 percent.

The complete report can be downloaded in PDF format at: http://www.ofheo.gov/media/pdf/2q07hpi.pdf

Copyright 2007 The Associated Press, Alan Zibel (AP Business Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.