U.S. home prices fell a seasonally-adjusted 1.7% in Q1 2008 -- the largest quarterly price decline in the 17-year data history of the U.S. Government's Office of Federal Housing Enterprise Oversight, government officials announced Thursday. (pdf)

Prices for single-family homes declined in 43 states, with hard-hit states California, Florida, and Nevada recording drops of 10.6%, 10.3%, and 8.1%, respectively, OFHEO said.

Prices nationally declined 1.4% in Q4 2007. OFHEO's report does not list sales prices, only percentage changes.

On the bright side, Wyoming, Utah, Montana, and Texas recorded the highest gains, of 6.3%, 5.6%, 4.9%, and 4.7%, respectively.

U.S. housing market worsens

Economist David H. Wang told BloggingStocks Thursday the OFHEO data, while not as comprehensive as U.S. Commerce Department housing data, nevertheless does not bode well for home sellers.

"It would be an understatement to say that home selling conditions right now are challenging, throughout much of the nation, except the oil patch," Wang said. "We have a substantial inventory build, tough borrowing requirements from lenders, and an economy growing inadequately, so the outlook is not good for home sellers or home prices," Wang said. "One can easily foresee another 10-20% price decline in many regions of the country. If we can limit it to 10% we will be fortunate."

Wang said it's now "abundantly clear" that both federal housing legislation -- currently working its way through the U.S. Senate Banking Committee -- and a U.S. economic recovery "will be required for the housing market to turn around."

Democrats and Republicans reached tentative agreement on housing assistance legislation Wednesday, increasing the prospects that President Bush will sign the bill, The Washington Post reported Wednesday.

Meanwhile, Wang is hopeful that the U.S. economy can catch up to its politics. "Tax cuts and U.S. Federal Reserve market interventions have added a large amount of stimulus to the economy, so the best-case scenario has the economy starting to recover in the third quarter of this year," he said. "The sooner the economy recovers, the sooner the housing market will."