Gov't home price index posts largest-ever drop

U.S. home prices fell 4.8 percent in the second quarter compared with a year ago, a new record low, according to a government report.

The government index for the April-June period, released Tuesday by the Office of Federal Housing Enterprise Oversight focuses on less expensive properties and includes fewer houses bought with risky home loans that have gone sour over the past year.

The previous record annual drop in the index's 17-year history was 3 percent and was set from January through march of this year.

The government index also fell 1.4 percent from the first quarter to the second quarter. That was a smaller drop than the record quarterly decline of 1.7 percent set in the first quarter.

As the housing market has turned into a bust over the past year, the most severe price declines have been seen in Western states. California's prices fell by nearly 16 percent, while Nevada's prices fell by 14 percent.

Also showing big price declines were Florida, where prices fell 12 percent, Arizona, where they fell 9 percent, and Rhode Island, where they fell by 5 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," OFHEO Chief Economist Patrick Lawler said in a statement. Prices in the weakest markets, he said, have receded to late-2005 levels.

OFHEO regulates the government-sponsored mortgage finance companies, Fannie Mae and Freddie Mac. Under the housing bill signed by President Bush last month, its functions will be folded into a new agency, the Federal Housing Finance Agency.

Also Tuesday, a widely watched index released Tuesday showed home prices dropping by the sharpest rate ever in the second quarter. The Standard & Poor's/Case-Shiller national home price index tumbled a record 15.4 percent during the quarter from the same period a year ago.

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