Home prices fell 6.7 percent in February year over year, according to a new report from CoreLogic. That numbers includes distressed sales, that is, sales of foreclosed properties or short sales, where the bank agrees to let the homeowner sell for less than the value of the mortgage. If you take those sales out, however, home prices were basically flat.

“When you remove distressed properties from the equation, we’re seeing a significantly reduced pace of depreciation and greater stability in many markets,” notes CoreLogic’s [ CLGX 18.48  -0.33 (-1.75%) ] chief economist Mark Flemming. “Price declines are increasingly isolated to the distressed segment of the market, mostly in the form of REO sales, as the stock of foreclosures is slowly cleared.”

Distressed sales, though, still make up more than a third of all home sales, according to the National Association of Realtors, and that number is likely to rise at least in the near future. The banks have slowed the process of foreclosure, and that has reduced the number of bank owned properties hitting the market lately, but it’s a whole different story with short sales.

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