UPDATE 1-U.S. 1st-qtr home price declines at record - OFHEO

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NEW YORK, May 22 (Reuters) - Declines in U.S. home prices accelerated in the first quarter, falling a record 1.7 percent from the end of 2007 and darkening the clouds over a struggling mortgage market, according to a federal index released on Thursday.

The national house price index of the Office of Federal Housing Enterprise Oversight (OFHEO), which covers home purchases, is also down a record 3.1 percent in the quarter from the year-ago period.

Falling home prices have wreaked havoc on the housing market since last year, stoking a rise in foreclosures as homeowners find their homes are worth less than they owe their lenders. The decline in home equity and tight credit conditions may cost nearly 13 percent of residential borrowers their homes by 2012, according to Credit Suisse.

"For homeowners and financial market observers, these declines spell further erosion in home equity levels and potentially more trouble for mortgage markets," James Lockhart, OFHEO's director, said in a statement.

The agency's broader index, which includes appraisals for refinancings, fell 0.2 percent last quarter and was unchanged from a year earlier.

OFHEO's monthly price index, introduced in February, showed home values declined by 0.4 percent in March, and are down 3.7 percent from their peak in April 2007.

The indexes showed the steepest price declines were concentrated in California, Nevada and Florida, OFHEO said. In the purchase index, eight states had quarterly price drops of more than 3 percent, and California and Nevada saw prices fall more than 8 percent. (Reporting by Al Yoon; Editing by Jonathan Oatis)