PORTLAND, Ore. (AP) - The latest Standard & Poor's/Case-Shiller reports shows Portland area house values dropping ever so slightly, bad news for recent buyers, but potentially good news for middle-income renters who have been priced out of the market.

Prices in January 2008 fell a half percentage point compared with January 2007, so they were essentially flat. But Portland's decline in prices from December to January represented the largest one-month drop on record.

Oregon, along with the rest of the country, enjoyed a historic real estate boom from 2004 to 2006. In the Portland region, prices increased 36 percent during that time, according to the Case-Shiller index.

The skyrocketing prices provided a perpetual opportunity for homeowners to bail themselves out of financial trouble. If they racked up too much debt, homeowners could refinance to pull out their growing equity.

But the prices also proved troubling for first-time buyers and parents concerned about what their children might someday have to pay. Until the boom, nationwide house prices had typically been about three times median annual income. Aided by low interest rates after the popping of the dot-com bubble, that yardstick went away. In Portland, median house prices peaked at $302,000 last summer and the median household income is nowhere near six figures.

The nationwide boom ended when subprime borrowers - those with spotty credit - bought houses their wages often couldn't support. They failed to make payments and lost their places. Lenders took a big hit and Wall Street lost billions. Real estate investors, a key source of demand, left the market; inventory surged and demand fell.

So far, the Portland region's home values have dropped 4 percent from their July 2007 peak, according to the Standard & Poor's report.

Mark McMullen, an Oregon-based senior economist for Moody's Economy.com, told The Oregonian newspaper that house prices could fall as much as 15 percent in Portland, Salem and Eugene and up to 25 percent in resort or retirement communities on the coast and in Bend, Hood River and southern Oregon.

Bill Conerly, a Lake Oswego economist, says the market needs to wait for about a year for new residents to buy up the remaining home inventory before the market stabilizes. Conerly said he isn't certain how much home values will drop because so much of the market is driven by buyer's perceptions. 

(Copyright 2008 by The Associated Press. All Rights Reserved.)