Prices of homes in the United States fell by an average of 7.6% in the second quarter of 2008, compared to the previous year, as 115 of the 150 metro areas surveyed saw declines, according to a new release from the National Association of Realtors.

Home prices in the West fell the most, dropping by 17.4% from Q2 2007, while prices in the Northeast fell 9.6%, prices in the South dropped 4.1% and prices in the Midwest fell 0.9%.

Lawrence Yun, senior economist at the NAR, said prices have fallen sharply in the most distressed markets, but now that buyers have returned to those areas, the price declines have probably hit a bottom.

"Furthermore, the momentum of buying is likely to continue in light of the housing stimulus package that was recently enacted. About 2.5 million first-time buyers are expected to take advantage of the $7,500 tax credit between now and the middle of next year."



Total existing-home sales, including single-family and condo sales, were at a seasonally adjusted annual rate of 4.91 million units in Q2, down 0.8% from 4.95 million units in Q1, and marking a 16.3% decline from the 5.87 million-unit pace in the same period last year.

Foreclosures and short sales account for about one-third of all transactions, causing a downward pull to the national median price. In the second quarter, the median existing single-family home price was $206,500, down 7.6% from a year ago, when it was $223,500.

NAR President Richard Gaylord said foreclosures are distorting the price data. "In many areas with large concentrations of foreclosure sales, homes are being purchased below replacement cost values," he said. "Many buyers with long-term expectations are getting exceptional value in the current market. Once the inventory is drawn down, price pressure will return because the costs of construction are rising - today's buyers are very well positioned to build wealth over time."

By Patrick McGee and edited by Sarah Sussman