McLEAN, VA Freddie Mac announced that its Conventional Mortgage Home Price Index (CMHPI) Purchase-Only Series registered a modest 0.4 percent annualized decline in U.S. home values during the second quarter of 2008, following a downward revised 10.8 percent annualized drop in the first quarter. Over the four quarters ending with the second quarter of 2008, home sales prices fell an average of 6.0 percent in the CMHPI Purchase-Only Series the largest annual fall in values over the 39-year history of the series.

"While U.S. home value indexes continued to decline, an encouraging sign has been the significant moderation in the rate of decline of the Purchase-Only series," said Frank Nothaft, Freddie Mac vice president and chief economist. "After falling sharply over the prior two quarters more than a 10 percent annualized drop home value depreciation slowed substantially to only a 0.4 percent annualized rate. While we expect to see further declines in average U.S. home values throughout this year and into 2009, we will be watching for signs of stabilization in indicators of real housing activity, such as a leveling off in home sales and for-sale inventories.

"Another good sign was that home values in some parts of the U.S. have remained stable or edged up. Most areas in the West South Central region (Arkansas, Louisiana, Oklahoma and Texas) experienced price gains over the quarter and the past year." Thirteen states registered price gains over the past year, and 33 states had increases in the second quarter, according to the CMHPI Purchase-Only Series. Modest annual price gains of 2 percent or more occurred in North Carolina, North Dakota, Oklahoma, South Dakota, Texas and West Virginia which have benefited from stronger local economies. Annual drops of more than 10 percent occurred in Arizona, California, Florida, Michigan and Nevada, which have experienced either weak local economic conditions or overbuilt markets.

The CMHPI Purchase-Only Series excludes all refinancings in its calculation. Freddie Mac also produces a CMHPI Classic Series that includes data from both home purchase transactions and mortgage refinancings, with the latter values based on appraisals. The Classic Series tends to lag changes in the Purchase-Only Series because of the inclusion of refinanced loans. The CMHPI Classic Series indicated that home values fell 7.3 percent nationally during the second quarter on an annualized basis, the steepest quarterly decline since 1971. Over the year ending with the second quarter, home values depreciated 2.9 percent on average in the Classic Series, the first annual drop in this index over the 39 years spanned by the series.

The Conventional Mortgage Home Price Index (Purchase-Only) Series shows the following regional performances:

West South Central Division (AR, LA, OK, TX): rose 1.7 percent (7.0 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values increased 1.6 percent, and during the last five years, home values increased 27.3 percent.

Middle Atlantic Division (NJ, NY, PA): decreased 0.5 percent (2.2 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 2.6 percent, and during the last five years, home values increased 38.8 percent.

East South Central Division (AL, KY, MS, TN): increased 1.7 percent (7.0 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 0.2 percent, and during the last five years, home values increased 26.7 percent.

East North Central Division (IL, IN, MI, OH, WI): increased 1.8 percent (7.5 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 4.0 percent, and during the last five years, home values increased 8.5 percent.

Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): decreased 0.6 percent (2.6 percent, annualized) in the second quarter of 2008. In the last 12 months, home values decreased 5.6 percent; during the last five years, home values increased 39.5 percent.

West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 1.9 percent (7.7 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values increased 2.3 percent; over the last five years, home values increased 15.8 percent.

South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): decreased 0.3 percent (1.0 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 5.5 percent, and during the last five years, home values increased 33.7 percent.

New England Division (CT, MA, ME, NH, RI, VT): increased 0.3 percent (1.2 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 5.1 percent, and during the last five years, home values increased 18.1 percent.

Pacific Division (AK, CA, HI, OR, WA): decreased 5.4 percent (19.7 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 11.4 percent, and during the last five years, home values have increased 48.1 percent.