Home prices post record decline

A government study finds home prices fell 1.7% in the first quarter of 2008. California, Nevada see sharpest drop.

By Beth Braverman, CNNMoney.com contributing writer
May 22, 2008: 11:49 AM EDT

Washington, D.C. -- The prices of homes sold in the first quarter of 2008 posted a record decline, according to a new report from the Office of Federal Housing Enterprise Oversight.

Home prices fell 3.1% from the first quarter of 2007, the largest decline in the purchase-only index, which excludes refinancings, since the agency began keeping records 17 years ago.

First-quarter prices dropped 1.7% from the fourth quarter, the largest quarterly dip ever.

"It's not going to be the largest decline on record for long," said Peter Schiff, president and chief global strategist at Euro Pacific Capital."Prices are going to keep falling until we get to the equilibrium, which is much, much lower. This is only the beginning."

The inflation-adjusted price of homes fell 7.7% on a year-over-year basis. At the same time, the prices of other goods and services rose 4.6%, according to OFHEO.

"The nominal price declines aren't as spectacular as they would be if we didn't have so much inflation," Schiff said. "Houses are becoming a less valuable asset relative to the cost of living."

OFHEO reported that prices fell in 43 states, with eight states seeing quarterly price declines of more than 3%. California and Nevada were the biggest losers, with home prices falling more than 8% in both states.

Prices on all transactions, including homes sales and refinancings, fell 0.2%year-over-year and remained flat compared to the fourth quarter, OFHEO reported.

California, Nevada, Florida, Arizona and Michigan exhibited the greatest price depreciation in all transactions in the first quarter. Wyoming, Utah, Montana, Texas and Alabama saw prices for all transactions increase the most.