Although home price appreciation has cooled in most places across the country and housing affordability is weak for costal areas, the healthy labor market remains a bright spot in this scenario, Lehman Brothers analysts said in a recent report.

Although U.S. house prices increased 12.4% from first quarter 2005 to first quarter 2006, home price appreciation only increased 2.03%, or an annualized 8.12% rate - the slowest pace since 1Q04. "While annualized quarterly HPA (AHPA) is a more volatile series than year-over-year HPA (YOY HPA) and often subject to restatement, it does signal that the long housing market boom has finally begun to cool off," analysts stated.

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