The latest quarterly federal study of home values confirms what many real estate industry economists had suspected: A nationwide slowdown in appreciation rates has begun in earnest.

It's not a bursting of the much-ballyhooed, mythical housing "bubble." It's not a downslide in the actual market resale values of homes. It is simply a decrease in the rate of increase in home values.

On a year-to-year basis, measuring first quarter 2003 home values to first quarter 2004, the national appreciation rate is still impressive: A 7.7 percent average gain spread over the millions of houses tracked by the Office of Federal Housing Enterprise Oversight (OFHEO) in 220 metropolitan markets.

But buried away in the first quarter 2004 appreciation data are signs that in even the hottest, high-froth housing markets, appreciation is cooling down. For starters, the national rate of just a 0.96 percent gain in the first quarter is the lowest recorded by OFHEO since mid-1998. On an annualized basis, that translates to a 3.8 percent annualized rate.

Of the 53 metropolitan markets where average home price gains over the past year have been in the double digits, 52 markets' annualized first quarter gains are lower than the last full year's. Moreover, six states registered slight quarterly price declines -- not just appreciation rate declines -- a rare occurrence in recent years. Those states are Vermont, Alaska, North and South Dakota, Iowa and Nebraska.

Patrick Lawler, OFHEO's chief economist, welcomed the nationwide slowdown in the home price spiral.

"This moderation in the growth of home prices is welcome because continued price jumps like those (in 2002-2003) would raise the potential for declines later on."

With mortgage rates on the upswing and the Federal Reserve Board on the verge of raising the cost of short-term money at the end of June, home price appreciation during the balance of 2004 is likely to average below the two prior years' levels, according to mortgage market economists.

Some markets continued to sizzle in the first quarter, despite the overall slowdown. Hawaii homes (up 15.2 percent for the past year and 15.6 percent on an annualized first quarterly basis) led the pack. But Nevada real estate wasn't far behind, led by Las Vegas' 16.4 percent annual rate and stunning 19.2 percent annualized first quarter rate.

Other high flyers, however, illustrate the overall trend. New York homes gained an average 10.2 percent last year, but the annualized first quarter rate this year was an anemic 2.4 percent. Maryland homes jumped by 13 percent last year, but slipped to a 7.4 percent annualized rate in the first quarter. Average Rhode Island home appreciation was nearly 15 percent last year but cooled to just 5 percent in the first quarter. Florida home gains declined from a full-year rate of nearly 12 percent to an annualized first quarter rate of 8.3 percent.

The broad slowdown underway -- even reaching into the Midwest and South, where appreciation rates had been moderate for years -- highlights an important, practical message for Realtors and their clients: Do not assume that the past year's gains will be duplicable in 2004. The cycle is shifting toward more modest price inflation, even in virtually all the highest-gaining markets.

Home sellers should not expect to be able to tack last year's rate of gain onto this year's selling price. Similarly, realty agents need to educate sellers about the price slowdown now getting underway.

As economist Lawler notes, hardly anyone, anywhere is looking at net price declines in the months ahead, absent major economic shocks. But almost everyone, everywhere should experience at least a moderate decline in the rate of local market appreciation. And bottom line, that's a healthy scenario.