Home prices on existing single-family homes continued to sink further into the abyss nationally during the first quarter of 2008, according to two leading industry indicators.

The Office of Federal Housing Enterprise Oversight (OFHEO) reported last week that prices fell 1.7 percent for the quarter, the largest quarterly price decline on record, based solely on purchase-only transactions (without refinancings). On a year-over-year basis the OFHEO reports that prices fell 3.1 percent between Q1 2007 and Q1 2008 to the lowest level seen in the 17-year history of its purchase-only house price index.

“These substantial home price declines bring positive and negative news,” said OFHEO Director James B. Lockhart. “For homeowners and financial market observers, these declines spell further erosion in home equity levels and potentially more trouble for mortgage markets. To prospective home buyers who have been shut out of homeownership because of affordability constraints, these declines may be welcome news, as are continued low mortgage rates.”

The OFHEO collects its data from the two Government Sponsors Enterprises it oversees — Fannie Mae and Freddie Mac — the nation’s two largest lenders. Due to the nature of the data it collects, the OFHEO’s index tracks prices paid for homes financed using conventional and conforming loans, not subprime, Alt-A or any other “exotic” loan product.

“On one hand, this is the worst housing market this side of the Great Depression, and we are far from immune,” Daniel Mudd, CEO of Fannie Mae, told his shareholders earlier this month. “On the other hand, Fannie Mae also has the best opportunity in years to grow and add shareholder value, simply by doing our job. That job is to stay in the market while others have fled, and keep money flowing from investors to housing. Those who said it would rise forever were wrong, and so are those who now say it will never recover. Housing will be back — and probably in better form than ever.”

Also reporting dismal findings for the quarter was the S&P/Case-Shiller Home Price index. Results of its first quarter 2008 survey revealed a 6.7 percent decline in home prices from the previous quarter and a 14.1 percent decline in prices from the first quarter of 2007 — the largest yearly decline in the 20-year history of the index.

“The steep downturn in residential real estate continues,” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path, with 19 of the 20 metro areas reporting annual declines, and six of those now at negative rates exceeding -20%.”

According to Case-Shiller, the weakest market in the country is currently Las Vegas, followed closely by Miami and Phoenix. Only Dallas and Charlotte reported positive numbers for the quarter.

Taken altogether, these reports should be seen as good tidings for real estate investors as well as home buyers who are interested in mining the foreclosure marketplace for bargain properties. The market is obviously nowhere near ready to bottom out and come back yet, meaning there is still time to dig in and find those properties that meet your individual purchase criteria.