Aug. 30 (Bloomberg) -- U.S. house prices rose at the slowest pace in a decade during the second quarter as lenders tightened mortgage requirements, according to a government report.

Prices for previously owned single-family homes rose an average of 3.2 percent from a year earlier, the smallest gain since 1997, the Office of Federal Housing Enterprise, known as Ofheo, said today in Washington. Prices grew 0.08 percent from the first quarter, the slowest since a decline at the end of 1994.

The worst U.S. housing slump in 16 years is deepening as buyers find it more difficult to get mortgages after foreclosures rose to a record, said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago. The report on the current quarter, due to be issued Nov. 29, may show price declines, she said.

``It's far too early to see the full impact of credit tightening,'' Swonk said in an interview.

About 14 percent of banks raised standards for mortgages to their most creditworthy borrowers and 56 percent made it more difficult for people with limited or tainted records to get loans, according to a Federal Reserve survey of senior loan officers in mid-July.

The share of all types of mortgages entering foreclosure rose to 0.58 percent in the first quarter, the highest in a survey that goes back to 1972, the Mortgage Bankers Association said in a June 14 report.

Foreclosures Rose

Subprime loans entering foreclosure rose to a five-year high of 2.43 percent, almost 10 times the 0.25 percent rate for prime loans that was a record. A report on the second quarter will be released next week.

Lehman Brothers Holdings Inc. shut down its subprime lending unit Aug. 22, pushing the tally of mortgage companies that have halted operations or sought buyers since the start of 2006 to at least 100.

U.S. home resales fell in July to an annual pace of 5.75 million, the slowest since November 2002, the National Association of Realtors said in an Aug. 27 report. Sales have declined for five consecutive months.

A measure of the supply of homes for sale in July rose to the highest since October 1991, the real estate trade group said. The median home price dropped 0.6 percent to $228,900 from an all-time high of $230,200 a year ago.

Another home-price gauge shows U.S. home prices fell 3.2 percent in the second quarter from a year earlier. The drop was the biggest ever in a series that goes back to 1987, the Aug. 28 S&P/Case-Shiller report said.

Market at a Standstill

``The housing market is at a standstill right now because buyers are reluctant to go back into the market,'' said Celia Chen, housing economist for Moody's Economy.com in West Chester, Pennsylvania. ``There's uncertainty whether the market will fall, so no one wants to buy.''

Home sales and construction will begin to increase in the middle of next year, Chen said.

``Home prices won't revive until 2009,'' Chen said.

Seven of the 10 biggest regional price drops were in California, including No. 1 Merced, down 8.7 percent. Santa Barbara was No. 2, at 8.1 percent, followed by Stockton, with a 7.2 percent decrease. Punta Gorda, Florida, fell 7.1 percent.

The biggest price gain was in Wenatchee, Washington, about 148 miles east of Seattle, up 24 percent from a year earlier. The area around Provo and Orem, Utah, 45 miles south of Salt Lake City, was No. 2 at 18 percent.

Northeast

New York's Nassau and Suffolk counties fell 0.08 percent, and Boston prices declined 1.8 percent. New Haven, Connecticut, rose 2.5 percent, Newark, New Jersey, gained 2.1 percent, and White Plains, New York, was up 2.7 percent.

Ofheo's Home Price Index measures changes of values for individual properties using selling prices and appraisals. It excludes homes with mortgages higher than $417,000, the maximum allowed this year for loans bought by government-chartered Fannie Mae, the largest mortgage buyer, and Freddie Mac, No. 2. The report doesn't give an average price, only the percentage change.

To contact the reporters on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

Last Updated: August 30, 2007 16:23 EDT