The nation's second-largest city, which was in stage 4 coronavirus lockdown for basically the entire month, saw prices slump 1.2 per cent in August.
The Victorian capital's prices are now down 4.6 per cent since the coronavirus pandemic hit in March.
In contrast, CoreLogic said the rate of decline reduced in Sydney (-0.5 per cent) and Brisbane (-0.1 per cent) last month.
Adelaide and Perth had flat prices, while Hobart (+0.1 per cent), Canberra (+0.5 per cent) and Darwin (+1 per cent) posted gains.
National house prices were down 0.4 per cent to August 31, 2020.(ABC News)
Nationally, home prices were down 0.4 per cent in August, but up 5.8 per cent over the past year.
Despite recent falls, both Sydney (+9.8 per cent) and Melbourne (+5.9 per cent) home prices are still higher than they were in August 2019.
CoreLogic's head of research Australia, Eliza Owen, said an unseasonal decrease in the number of properties coming to the market for sale was likely contributing to some of the price stabilisation outside of Melbourne.
"Over the month of August 2020, we've seen new listings volumes down about 12 per cent, or a decline of about 3,500 additional listings over the month," she observed.
"This is a time of year, we'd usually see listings volumes increase in the ramp up to the spring selling season.
"The relatively tight levels of stock available on the market at the moment are maintaining some of that stability in the dwelling market prices as well."
The same trend has been reported by rival real estate data provider SQM Research, which noted a 10.1 per cent drop in new sale listings hitting the market in August.
Combined with some properties either selling or being pulled from sale, SQM reported a 6.3 per cent drop in total real estate sale listings from July to August, with 293,053 properties listed for sale nationally last month.
As with prices, Melbourne also led the decrease in property listings, with a 13.2 per cent fall.
"It is reflective of the near entire freeze-up of the Melbourne housing market," said SQM's managing director Louis Christopher.
"As the Victorian State Government is heavily reliant on property stamp duty revenues, there must be a significant state revenue collapse occurring."
Another area where the number of properties listed for sale is falling is many regional locations.
However, in this case, Mr Christopher said it is demand from buyers that is quickly soaking up the properties that are for sale.
"Our take on that phenomenon is that demand has boomed for regional real estate as more of our populations looks to remote living," he said.
CoreLogic's data show that regional markets saw unchanged prices over August and are down just -0.2 per cent over the past three months.
Ms Owen says she does not think regional markets will be immune from the coronavirus-related falls, with growth rates already softening in some areas, but they may be hit less hard than some capitals.
"In the short term, regional Australia can't really avoid a cyclical downturn, because of the shock to employment and incomes that we've seen across Australia," she said.
"That's already prevalent across regional Victoria where we've seen property value declines of about 1 per cent over the past three months.
"So I think that, while there is an understandable demand for the low density, the low price point and the flexibility that comes with remote work — these things will spur demand for regional properties in the long term — it's worth noting that they'll probably still experience that short-term downturn."
Investigations are now underway into a major fire that broke out in Truro early this morning.