Freddie Mac said Tuesday that its home price index for conventional mortgages it purchased last year registered a 0.4 percent decline from the fourth quarter of 2008 to the fourth quarter of 2009.

The GSE was quick to point out that this was a much smaller decline than the 9.5 percent drop in home prices recorded in 2008, perhaps signaling much needed stabilization in the marketplace. In the final quarter of 2009, the index was down 1.4 percent relative to the third quarter, on a non-seasonally adjusted basis.

“We normally see a seasonal effect in the fourth quarter price index that reduces its value. A year-over-year comparison largely controls for this,” said Frank Nothaft, Freddie Mac’s chief economist and VP. “Over 2009, the national index dipped slightly – -0.4 percent – and four-of-nine regions posted price gains.”

The Pacific region of the country recorded its third consecutive quarterly gain as well as an annual increase

in prices. There, home prices rose 0.5 percent from the third to fourth quarter of 2009. Over the last 12 months, home values increased 1.6 percent, according to Freddie Mac’s report.

The West South Central (1.5 percent), West North Central (1.1 percent) and the East South Central (0.8 percent) regions also saw year-over-year price increases.

The Mountain region, which includes Arizona and Nevada, posted the largest annual decline, with prices dropping 7 percent. Other regions in negative territory included the South Atlantic (-1.8 percent), East North Central (-0.9%), and New England and Middle Atlantic, which both saw prices drop 0.1 percent.

Freddie Mac also produces a separate home price index series that includes data from both home purchase transactions and mortgage refinancings, with the values of refinanced loans based on appraisals. This index indicated that average U.S. home prices fell 0.7 percent from the third to fourth quarter and depreciated 4.3 percent over 2009.

Freddie Mac explained that because appraisals are backwards looking through the use of recent comparable property transactions, the index that includes refinancing will typically lag changes in the purchase-only series.

“Mortgage rates on 30-year fixed-rate loans hit an all-time low in Freddie Mac’s Primary Mortgage Market Survey in December and averaged 4.9 percent over the fourth quarter,” Nothaft said. “Low rates coupled with the first-time homebuyer tax credit helped boost home sales to their highest level in two-and-a-half years, seasonally adjusted.”