July 22 (Bloomberg) -- U.S. home prices fell at the fastest pace of the year in May, compared with the same month in 2007, suggesting no end to the three-year housing slump.

Prices dropped 4.8 percent, faster than the 4.6 percent year- over-year decline in April, the Office of Federal Housing Enterprise Oversight said in a report today. The one-month decline, from April, was 0.3 percent, Washington-based Ofheo said.

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.

Regional Prices

The only region to see a price gain was the West South Central with an increase of 0.5 percent. It includes Oklahoma, Arkansas, Texas and Louisiana. The monthly house price index is down 4.9 percent from its peak in April 2007, Ofheo said.

The decline in May from April was better than the 0.8 percent average estimate of seven economists surveyed by Bloomberg News. Ofheo is the government agency that is the regulator of Fannie Mae and Freddie Mac.

California had the most foreclosure filings in June for the 18th consecutive month, increasing 77 percent in June from a year earlier to 68,666, according to data from Irvine-based RealtyTrac Inc.

Sales of previously owned homes probably will drop to 5.39 million in the U.S. this year, 24 percent below the 2005 all-time annual high of 7.08 million, the National Association of Realtors said in a July 8 forecast. Measured monthly, home sales reached a peak in September 2005, at an annualized pace of 7.25 million.

The median U.S. home price probably will tumble 6.2 percent in 2008 to $205,300, the realtors group said in its forecast. Last year's 1.4 percent drop was the first national decline in the U.S. median since the Great Depression, according to Lawrence Yun, chief economist of the housing group.

Foreclosures Jump

New foreclosures rose to a seasonally adjusted 0.99 percent of all U.S. home loans in the first quarter, up from 0.83 percent in the prior period, the Mortgage Bankers Association said on June 5.

The total inventory of homes in foreclosure increased to 2.47 percent and the delinquency rate, loans with one or more payments overdue, grew to 6.35 percent. All were the highest in a series that goes back to 1979, the Washington-based trade group said.

Housing prices will fall another 10 percent to 15 percent over the next 12 months, making it a mistake for policy makers to raise borrowing costs to curb inflation, said Bill Gross, who manages the world's biggest bond fund at Pacific Investment Management Co.

Home prices in 20 cities dropped 15.3 percent in April from a year earlier, according to S&P/Case-Shiller, the most since the group began collecting data.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

Last Updated: July 22, 2008 13:51 EDT