Aug. 1 (Bloomberg) -- Home prices fell in 23 of 25 U.S. metropolitan areas in May from a year earlier as foreclosure sales pushed down values and most areas remained mired in the housing recession.

Sacramento had the biggest price drop, falling 31 percent from May 2007. Prices declined 29.5 percent in Las Vegas, 27.2 percent in San Diego, 26.9 percent in St. Louis and 25.8 percent in Phoenix, said real estate data company Radar Logic Inc. Sales rose in 22 areas in May from April, driven by ``motivated'' sellers including banks that foreclosed on or took possession of homes whose owners defaulted, the company said.

``Price declines are occurring in areas where subprime lending was heavily concentrated, and a large percentage of sales are foreclosure sales,'' Susan Wachter, professor of real estate finance at the University of Pennsylvania's Wharton School, said in an interview. Prices for ``those sales are always significantly lower than transactions that are not forced,'' she said.

Housing legislation signed by President George W. Bush is designed to help 400,000 homeowners facing foreclosure, which depresses neighboring property values. Foreclosure filings more than doubled in the second quarter from a year earlier as one in every 171 households was in a stage of default, according to Irvine, California-based RealtyTrac Inc., a seller of such data. The S&P/Case-Shiller home-price index of 20 metropolitan areas dropped 15.8 percent in May, the most since at least 2001.

May Sags

Radar Logic's May report showed no improvement in prices from April. May was the second consecutive month when prices fell in 23 of 25 metropolitan areas from a year earlier, suggesting no end to the three-year slump.

Nationally, home prices fell at the fastest pace of the year in May, dropping 4.8 percent from a year earlier, the Office of Federal Housing Enterprise Oversight said in a report on July 22.

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 more than $470 billion in mortgage-related losses and writedowns.

Bill Gross, who manages the world's biggest bond fund, predicted last month that falling U.S. home prices will force financial firms to write down $1 trillion from their balance sheets, crimping bank lending and sparking sales of assets.

Foreclosures led to increased sales in some areas where prices declined and ``people began to bargain hunt,'' Michael Feder, president of New York-based Radar Logic, said in an interview.

Sales Rise

The number of transactions rose 27.7 percent in Sacramento and 13 percent in San Diego from a year earlier and fell in the 23 other areas surveyed.

St. Louis had the biggest transaction decline, falling 75.9 percent, followed by Philadelphia (49.6 percent), Seattle (46.1 percent) and Atlanta (41 percent). Manhattan condominium transactions fell 31.8 percent, Radar Logic said.

Sales of foreclosed homes in which borrowers had fallen behind on their payments almost tripled nationwide and increased 12-fold in Phoenix, six-fold in Miami and five-fold in Los Angeles, Radar Logic said. Such sales increased 59 percent in New York.

Five of the top 10 price declines from a year earlier were in California metropolitan areas.

Milwaukee and Columbus, Ohio, the only cities in the survey to show price increases, gained 1.1 percent and 0.1 percent in May from a year earlier, respectively.

Prices in the New York metropolitan area fell 5.8 percent from a year ago. They dropped 6 percent in Chicago and 7.8 percent in Boston, Radar Logic said.

The RPX Monthly Housing Market Report, published by Radar Logic, measures home values using a proprietary algorithm to derive a price per square foot. Data reflects 28-day aggregated values, the company said. The prices are the basis for property derivatives traded on the Residential Property Index.

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net

Last Updated: August 1, 2008 13:14 EDT