Maryland home sale prices fell at the end of the year, the first dip into negative territory since 1995, according to new government figures.

The Office of Federal Housing Enterprise Oversight said yesterday that prices in the state dropped modestly, just under 1 percent in the final three months of 2007 versus the fourth quarter of 2006. But conditions for sellers worsened as the year progressed, with prices falling 2.6 percent between the summer and fall alone.

Home prices declined in every state except Maine in the October-December quarter versus the third quarter that ended Sept. 30. Maryland's price decline was 13th largest, behind such slump-battered states as California and Nevada.

"Prices are weakening a fair bit right now, but the massive price declines we're seeing in Florida and California and Nevada and so forth haven't quite hit our area," said Andrew Leventis, senior economist at the federal agency, which oversees mortgage financiers Fannie Mae and Freddie Mac.

"I think the spring will be very telling," he added. "Last springtime, we saw a massive increase in the inventory of for-sale homes, ... and that almost certainly put significant downward pressure on prices."

That "inventory overhang," as Leventis puts it, is a problem for local sellers. More than 18,000 homes were on the market in metropolitan Baltimore in January. It would take 14 months to sell them all at the current sales pace, twice as long as a year earlier.

The Office of Federal Housing Enterprise Oversight tracks repeat transactions of the same single-family houses to avoid the skewing that happens when the types of homes sold change significantly from one period to another. For metro areas, the agency combines sales and refinance transactions. That measure showed prices in the Baltimore metro area rising about 2 percent in the last three months of 2007, compared with the final quarter of 2006.

That was the smallest increase since 1997 and ranked the metro area in the middle of the pack nationwide.

Refinancing a factor

Celia Chen, director of housing economics at Moody's Economy.com, warned that prices likely were lifted by the refinance transactions. With tighter credit standards now, only homeowners on stronger footing can refinance.

That's part of the reason Baltimore-area prices are up on this measure but down according to the National Association of Realtors.

OFHEO also tracks only those loans purchased by Fannie and Freddie, which cuts out mortgages of more than $417,000 and almost all - if not all - subprime loans.

As a result, the homes in agency's index are probably more modestly priced than in other measurements, Chen said.

"There's just more stability in these types of homes," she said. "The prices aren't falling as quickly."

Consider metropolitan Washington, which has a lot of expensive homes.

Drops nearly 3%

Prices there dropped nearly 3 percent year-over-year, according to OFHEO's measurement. But the Standard & Poor's Case-Shiller index, also out yesterday, shows a decline of more than 9 percent from December 2006 to December 2007.

Case-Shiller does not track Baltimore.

Chen said Moody's Economy.com expects the second half of the year will bring a bottoming out in home sales but not prices.

The company predicts price declines of about 20 percent nationally and in the Baltimore area, when all is said and done.

"That housing market is not one of the most endangered," Chen said of the Baltimore metro area, "but it certainly is a market where we do see some correction."

jamie.smith.hopkins@baltsun.com

Gainers, losers

Here's how Baltimore and Washington ranked among 291 metro areas, as well as the top and bottom five, in terms of percentage change in home price in the fourth quarter of 2007 versus a year earlier:

1. Wenatchee, Wash. 13.7%

2. Houma-Bayou Cane- Thibodaux, La. 12.2%

3. Grand Junction, Colo. 12%

4. Ogden-Clearfield, Utah 10.8%

5. Bismarck, N.D.10.7%

134. Baltimore 2% --

237. Washington -2.9% --

287. Punta Gorda, Fla. -13.3%

288. Port St. Lucie, Fla. -14.5%

289. Stockton, Calif. -15.3%

290. Modesto, Calif. -15.5%

291. Merced, Calif. -19%

[Source: Office of Federal Housing Enterprise Oversight index of repeat sales and refinance transactions