Nov. 29 (Bloomberg) -- U.S. home prices declined for the first time since 1994 in the third quarter as foreclosures increased and lenders tightened mortgage requirements, according to a government report.

Prices for previously owned single-family homes fell 0.4 percent in the period, compared with the second quarter, the Office of Federal Housing Enterprise Oversight said today in Washington. Prices rose 1.8 percent from a year earlier.

``The housing price boom that we witnessed over the last several years is gone and it is never coming back,'' said Michael Darda, chief economist of MKM Partners LP in Greenwich, Connecticut. ``Home prices will underperform the inflation rate for an extended period of time.''

Home delinquencies have risen to a five-year high and 40 percent of U.S. lenders have raised their standards on mortgages for prime borrowers, their most creditworthy customers, according to Federal Reserve data. Foreclosure filings almost doubled in October to 224,451, according to Irvine, California- based Realtytrac Inc., a seller of delinquency data.

Another housing measure issued today showed fewer new homes than forecast were sold in the U.S. in October and prices for them dropped by the most in almost four decades.

New Home Sales

A total of 728,000 new houses were purchased at an annual rate, the Commerce Department said in Washington. That compared with a median forecast of 750,000, according to economists surveyed by Bloomberg News. The figure was up from a revised 716,000 pace in September that was the lowest in almost 12 years.

Ten states including Michigan, California and Nevada saw price declines over the last four quarters, the greatest number since 1997, Ofheo said. Of 287 cities surveyed, 83 saw a drop in home prices and 17 of the 20 cities with the greatest depreciation were in Florida and California.

Utah, Wyoming and Montana posted the biggest gains in the third quarter from a year ago, Ofheo said. Prices rose 13 percent in Utah, 12 percent in Wyoming and 7.7 percent in Montana.

The housing market hit bottom in 1991 amid the U.S. recession and languished until the first quarter of 1995. In 1994, the Federal Reserve began a series of seven interest rate increases over 11 months. House prices began to rise the next year and continued gaining for 12 years.

Severe Drop

The quarterly decline reported today by Ofheo is ``proof positive of the severity of the downturn'' in housing, said Mark Zandi, chief economist of Moody's Economy.com, a research firm and unit of Moody's Corp. in New York. The weakness is cause for concern because the data ``covers the part of the housing market that is the strongest, the conforming market.'' That comprises sales to buyers with good credit who borrow less than $417,000, he said.

Lenders began offering more mortgages without documenting borrowers' income as the inventory of unsold homes started rising in 2005. They also marketed more loans with low introductory ``teaser'' rates to lure homebuyers. Those mortgages contributed to higher foreclosures beginning in the third quarter of last year.

Mortgage Writedowns

Housing plunged deeper into recession in September as sales of previously owned homes fell 8 percent to an annual rate of 5.04 million, the fewest since records began in 1999, the National Association of Realtors said on Oct. 24.

The collapse of the market for bonds backed by mortgages has spurred U.S. banks to take more than $47 billion in writedowns. Fewer mortgages and falling prices have made it harder to refinance or sell.

A report from S&P/Case-Shiller on Nov. 27 showed third- quarter home prices fell by the most in at least two decades. Values declined 4.5 percent in the three months through September, the most since records began in 1988.

Home prices in 20 U.S. metropolitan areas dropped 4.9 percent in the 12 months ended September, S&P/Case-Shiller said.

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, the second biggest. The report doesn't give an average price, only the percentage change.

To contact the reporter on this story: Sharon L. Crenson in New York at screnson@bloomberg.net

Last Updated: November 29, 2007 12:24 EST