Prices of U.S. office, retail and apartment buildings fell 1 percent in June, easing from steep slides in the previous two months, according to the Moody's/REAL Commercial Property Price Index released on Wednesday.

It was the ninth consecutive decline for the index, putting the sector down 35.5 percent from a 2007 peak to levels not seen in five years.

The index fell 16.4 percent in the second quarter after a 7.6 percent drop in May and an 8.6 percent slide in April.

The $6 billion U.S. commercial real estate market is a key focal point for the Federal Reserve and lawmakers who have pegged it as a particular danger to the U.S. economic recovery.

Programs aimed at reviving lending are just getting underway, but the efforts are complicated as falling revenue and prices are reducing value of the properties and causing defaults.

In a separate report, the National Association of Realtors on Wednesday said activity last quarter was at its slowest in 15 years, and that weakness would persist into 2010. It also spotted a slowdown in the decline, however.

From low levels, the Moody's and Real Estate Analytics LLC report showed a nearly 50 percent pickup in repeat sales transactions in June from May.

I'm encouraged that we're seeing -- albeit one observation -- a stabilization in the decline in prices, coupled with a growing volume of transactions, said Neal Elkin, president of Real Estate Analytics. The money is coming in from the sidelines.

A 4.1 percent rise in office building prices in the second quarter surprised analysts, especially with rising joblessness boosting unemployment and putting downward pressure on rent. The increase may be due to investors seeing value in tertiary markets such as New Haven, Connecticut, where prices had fallen the fastest, Elkin said.

Regionally, offices in the western United States suffered the largest declines in the first and second quarters of any building type, and are down 34.9 percent since the third quarter of 2007, the Moody's/REAL indexes show.

Falling values led Maguire Properties Inc (MPG.N), one of the largest owners of office buildings in Southern California, to walk away from seven properties this month, according to analysts. As values drop, other borrowers may follow suit and ask for breaks on their loans, betting the lender won't want to sell in a depressed market, Citigroup analysts said.

Many analysts have forecast commercial real estate price declines of 40 percent to 45 percent from the 2007 peak.

Improved access to credit via the Fed's Term Asset-Backed Securities Loan Facility, or TALF, should help the commercial real estate sector at a time when billions of dollars in loans are facing refinancing needs. But the fate of the labor market remains critical, said Lawrence Yun, chief economist at the National Association of Realtors.

The Fed this week extended the program that will provide loans for investors purchasing new commercial mortgage-backed bonds through June, from December.

The office sector requires job growth to fuel the demand for additional space, Yun said.

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