An index issued Thursday suggests the nation’s sputtering housing market is running low on the fuel it needs to accelerate — price appreciation.

The Office of Federal Housing Enterprise Oversight’s House Price Index for the fourth quarter of 2006 shows home prices were up 1.1 percent from the previous quarter and up 5.9 percent from the fourth quarter of 2005 — down from the 7.9 percent year-over-year increase reported in the third quarter of 2006.

For the second consecutive quarter Michigan’s home price appreciation declined on a year-over-year basis, dropping 0.4 percent. Not coincidentally, Michigan documented the nation’s second highest foreclosure rate in January 2007, according to RealtyTrac’s U.S Foreclosure Market Report. No other state registered declining appreciation rates, but several cities did — including Santa Barbara, Calif., Detroit, Reno, Nev., Canton, Ohio, and Cambridge, Mass.

Other markets, in contrast, continued to post strong home price appreciation. At the top of the list were several states in the West and Northwest — Utah, Wyoming, Idaho, Washington and Oregon. These states documented year-over-year appreciation rates between 13 and 18 percent.

Investors should start finding more foreclosure bargains in areas with declining home price appreciation as more homeowners in financial distress aren't able to refinance their way out of foreclosure. And foreclosure bargains are also available in areas where home price appreciation is still strong, giving investors a better chance to realize a quick return on their investment.