The new monthly OFHEO purchase-only home price index is expected to fall 1.5% in February, following a 1.1% decline in the January report.

The purchase-only index, based on data from home sales, was introduced in OFHEO�s fourth quarter 2007 House Price Index (HPI) report, and provides home price conditions for the nation and each of the nine Census Divisions.

In the previous month, U.S. home prices fell 1.1% between December 2007 and January 2008, contributing to a 12 month decline of 3.0%. Since its peak in April 2007, the monthly index has fallen by 4.1%.

Michael Gregory, an economist at BMO Capital Markets, said house prices �likely displayed deepening deflation,� falling to -3.5% year-over-year in February, from -3.0% in January.

In the quarterly report for Q4 of 2007, the purchase-only house price index fell by 1.3% from the third quarter, a substantially greater decrease than the 0.3% price decline between Q2 and Q3. Over the past year, prices fell 0.3%, as the fourth quarter decline erased earlier price gains. This was the first four-quarter decline since 1991.

The purchase-only index has exhibited greater weakness over the past year from the all-transactions index, which rose by 0.8% in 2007.

The purchase-only index is based on more than five million repeat sales transactions, while the all-transactions index, released quarterly, includes more than 34 million repeat transactions. Both indexes are based on data obtained from Fannie Mae and Freddie Mac for mortgages originated over the past 32 years.

By Patrick McGee and edited by Stephen Huebl