“The housing market is still depressed but it had a good quarter,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said in a telephone interview today. “We’re on the mend but it’s still something that will take two or three years before we’re back to normal.”

The national median existing single-family home price was $158,100 in the first quarter, down 0.4 percent from the first three months of 2011, according to the Realtors group.

The best-performing metro area was Cape Coral, Florida, where prices increased 28.1 percent from a year earlier. Prices rose 19 percent in Grand Rapids, Michigan; 16.9 percent in Palm Bay, Florida; and 16.6 percent in Erie, Pennsylvania.

Biggest Declines

Kingston, New York, had the biggest decline, with the median selling price tumbling 22 percent in the quarter. It was followed by Stamford, Connecticut, with an 18 percent decline; Mobile, Alabama, at 14.7 percent; and Atlanta at 12 percent.

The median selling price is influenced by the mix of homes on the market and probably was boosted by a smaller share of transactions involving distressed properties. Those homes, which sell at discounts, accounted for 32 percent of first-quarter sales, down from 38 percent a year earlier.

Prices are more volatile than normal because they are affected by the prevalence of distressed sales and “sudden upswings” in buyer interest in some areas, said Lawrence Yun, the group’s chief economist.

‘Broad Shortages’

“We have broad shortages of lower-priced homes in much of the country, with very tight supply in Western states for homes through the middle price ranges,” Yun said in the report. “This is good news for many sellers who wish to list now, or for those waiting for prices to improve.”

Sales of previously owned homes rose 5.3 percent in the first quarter from a year earlier, according to the report. Purchases climbed 11.7 percent in the Midwest, 6.6 percent in the Northeast, 4.1 percent in the South, and 1.4 percent in the West.

Fannie Mae, the nation’s biggest mortgage-finance company, today reported a $2.7 billion first-quarter profit after a $6.5 billion loss a year earlier, citing smaller declines in home prices as one of the reasons for improvement. The Washington- based company said that it won’t need Treasury Department aid to balance its books for the first time since it was seized by federal regulators in 2008.

By Prashant Gopal – May 9, 2012 12:13 PM ET

To contact the reporter on this story: Prashant Gopal in New York at [email protected]

To contact the editor responsible for this story: Kara Wetzel at [email protected]