First Quarter U.S. Home Prices Fall 3.1%, Ofheo Says

First Quarter U.S. Home Prices Fall 3.1%, Ofheo Says

May 22 (Bloomberg) -- U.S. house prices sank 3.1 percent in the first quarter from a year earlier, according to a government report, as buyers waited for values to stop falling.

Prices for previously owned single-family homes fell in 43 states, with values in California and Nevada tumbling more than 8 percent, the Office of Federal Housing Enterprise Oversight, known as Ofheo, said today in Washington.

Potential buyers are waiting for prices to hit bottom, causing the inventory of unsold properties to swell. People who are ready to buy face difficulty obtaining financing as lenders tighten standards and cut back on the number of mortgages they are writing, according to Paul Kasriel, chief economist at Northern Trust Corp. in Chicago.

``It's a dismal picture, there's no way around it,'' Kasriel said. ``A complicating factor is the fact that so many homeowners owe more on their mortgages than their houses are worth. This is a financial crisis. You can't put lipstick on this pig.''

The number of mortgage originations is expected to drop 18 percent this year from 2007, according to the Mortgage Bankers Association.

Reduced Lending

Almost two-thirds of U.S. banks have raised standards for mortgages to their most creditworthy borrowers, and three-fourths made it more difficult for people with limited or tainted credit to get loans, according to a Federal Reserve survey of senior loan officers published May 5.

Purchase-only prices fell an average of 1.7 percent from the fourth quarter of 2007, Ofheo said. In Ofheo's ``all- transactions'' index, which includes appraisals for refinancings, prices fell 0.2 percent, according to the report.

Foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said in a March 6 report.

New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter, the highest since the bankers group began tracking the statistic in 1979, from 0.54 percent a year earlier. Late payments rose to a 23-year high, the mortgage bankers said.

Ofheo's Home Price Index measures changes of values for individual properties using selling prices and appraisals based on data from government-sponsored companies Fannie Mae, the largest U.S. mortgage buyer, and Freddie Mac, which is No. 2.

The report doesn't give an average price, only the percentage change.

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