Widespread price declines characterized much of the nation's housing market in the first quarter, with single-family home prices dropping at a steep 6.7 percent annualized rate according to a report issued Monday afternoon by economic and financial analysis firm Global Insight, Inc. The first-quarter drop was the third straight quarterly decline in housing prices, according to the company's research. Nationwide, 262 housing markets out of 330 in the study -- the overwhelming majority of the nation's housing markets -- experienced declines, Global Insight said, accounting for 84 percent of all housing units and 89 percent of real estate value. Not surprisingly, California, Florida and Michigan accounted for the steepest losses, and contained 45 of the 50 worst performing metropolitan areas for this period. California and Florida have been among the most overvalued states for the past several years, and Michigan is reeling from the impact of a slumping economy. Other housing markets in the bottom 50 during the first quarter included Las Vegas and Reno, Nevada and Bend, Oregon. "The housing market will take some time to recover as consumers are constrained not only by tighter credit standards, but rising costs in other areas of the economy," said Jeannine Cataldi, senior economist and manager of Global Insight's regional real estate service. "There is also excess supply that needs to be absorbed, plus the rate of foreclosures entering the market needs to slow before housing can begin to pull out of its current downward trend." Price declines leading to greater affordability In the first quarter 2008, only eight housing markets -- down from a peak of 53 in 2006 -- were determined to be overvalued by Global Insight's analysis, representing only 1 percent of the U.S. single family housing stock and 2 percent of total real estate value, down from 32 percent and 16 percent, respectively, from 2006. Areas of the Pacific Northwest, including Bend, Oregon and Longview, Washington, continued to be among the most overvalued. However, other areas once extremely overvalued -- in particular, the Northeast and coastal California and Florida -- are now rated by Global Insight as fairly valued, a sign that some of the hardest-hit housing markets may be nearing a bottom. Additionally, a number of widely dispersed and mostly smaller markets throughout the country that had seen less price fluctuation during the boom years have shown strong price resilience. As proof of the power of small towns, the top nine housing markets registering price increases during the first quarter all had populations less than 300,000 -- and were as varied as Ithaca, New York; Billings, Montana; Houma, Louisiana; and Odessa, Texas. The Global Insight study uses a model that was originally developed at National City Corp. (NCC), although the bank no longer sponsors the study. For more information, visit http://www.globalinsight.com. Disclosure: The author held no positions in NCC when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.