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Housing prices dropped 4.8 percent in May from the previous year according to the Office of Federal Housing Oversight. The most severe hit occurred out west where housing prices fell 14.5 percent while prices actually rose in the West South Central region of the country (Oklahoma, Arkansas, Texas and Louisiana).

What does this mean? Overall the housing market is still declining. Sellers are still being confronted with competition from foreclosures and when they find a buyer, banks are being very tight lending money.

Eight out of nine regions showed declines as the worst housing slump in more than a quarter of a century deepened with banks cutting lending following $400 billion in mortgage-related losses and writedowns. Treasury Secretary Henry Paulson last week asked Congress to approve legislation allowing the government to extend credit to Fannie Mae and Freddie Mac and buy their stocks if needed to stem further declines in housing.

A new law including provisions for stricter regulation of the government sponsored enterprises “may have a positive impact on future house price performance,” Ofheo Director James Lockhart said in a statement.

Prices fell the most from a year ago in California, Washington, Oregon, Alaska and Hawaii, which recorded a 14.5 percent drop. Florida, Georgia, the Carolinas and states in the south Atlantic fell 5.8 percent, Ofheo said. In New York, New Jersey and Pennsylvania the decline was 2.1 percent.  via Bloomberg.com

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