Home Prices Fall Record Amount in Quarter

U.S. home prices fell at an annualized 6.92% rate in the first quarter, according to the Office of Federal Housing Enterprise Oversight's purchase-only quarterly index. This is the largest decline in the index's 17-year history.

Housing prices have fallen 3.1% in the last year, according to the index.

"These substantial home price declines bring positive and negative news," said OFHEO Director James B. Lockhart in a release. "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."

As home prices fall, many mortgage holders have found themselves with their debt exceeding their home's value. Negative equity has left them unable to pull money out of their homes or to refinance when subprime balloon payments come due, causing foreclosure rates in many areas to skyrocket.

Another OFHEO index, which includes data from appraisals for refinancing, showed that home prices held steady: The all-transactions House Price Index was flat over the last year and fell only 0.2% in the last quarter.

Other indices have shown big declines over the last year. The 10-city Case-Shiller composite index showed an 8.8% drop; there was a 7.4% drop in the 20-city composite index in February from the same month the prior year. The nationwide median price of single-family homes fell 7.7% in the first quarter from the year-earlier period, according to the latest quarterly survey of the National Association of Realtors.