U.S. home prices declined by an annualized 0.4 percent during the second quarter of 2008, following a 10.8 percent annualized drop in the first quarter, according to the latest Conventional Mortgage Home Price Index Purchase-Only Series from Freddie Mac, which excludes refinanced transactions in its calculations.

“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.”