The year-over-year housing price decline decelerated to its lowest level of the year in June, but that doesn’t mean housing is about to hit bottom, according to officials at First American CoreLogic, a division of The First American Corp (FAF). National housing prices decreased 7.8% in June 2009 compared to June 2008, according to First American’s Loan Performance Home Price Index (HPI). First American said home prices have improved 3.3% during the first six months of the year, but a number of artificial variables contributed to the moderation of year-over-year declines.  Home prices are up in part due to the decline of distressed sales, rather than an increase in traditional real estate transactions. “If the decline in distressed sales is sustainable, and not simply a result of recent foreclosure moratoriums, this could be the first step toward recovery, which will then be followed by outright price increases that will result in continued upward price trends,” First American said in a release. While an increase in modifications has kept some homes off the foreclosure auction block, an continued decline doesn’t seem likely because various foreclosure moratoria are winding down, First American senior economist Sam Khatner told HousingWire. “We know one of the reasons the number of REO sales has been declining is because of the market interventions that have occurred in the past year or so,” Khatner said. “The distressed is there still and the distressed is there because home prices are declining and also the unemployment rate has been rising over the past year.” First American’s researchers believe more than 15.2m mortgagors are underwater, representing nearly one-third of the nation’s mortgage market. Khatner said First American expects home prices won’t bottom out until the end of 2010. He also said subsidies like the first-time homebuyer tax credit and artificially low interest rates won’t be around forever, and will contributed to continued lower prices down the road. “You have a lot of moving parts to this thing, and you have all these subsidies, the interventions, all this public policy that’s distorting some of this stuff,” Khatner said. “At some point, they’re going to have to be pulled back.” Write to Austin Kilgore.