The only exceptions are sales closings for cheap houses for sale in the West, especially California, where home prices have been falling much more rapidly than in other states. One analyst interpreted this as due to the efforts by banks to turn their foreclosed properties into cheap houses for sale.

Trends in the housing market can be studied based on the home price indexes released by the Federal Housing Finance Agency (FHFA), which was previously known as Office of Federal Housing Enterprise Oversight (OFHEO). The FHFA indexes focus on mortgage loans acquired by Fannie Mae and Freddie Mac and do not cover jumbo mortgage loans.

In some parts of California, especially the Central Valley, home price indexes including those for cheap houses for sale have been falling at rates higher than in other areas in the country.

Across the country, the cities with the highest declines in home price indexes and the most number of cheap houses for sale in the fourth quarter of 2008 are Merced and Stockton, both in California. Home price indexes these cities declined by 49.5 and 40.19 percent, respectively.

The other areas in California with the most number of cheap houses for sale are Modesto and the communities of Vallejo-Fairfield and Riverside-San Bernardino-Ontario. Home price indexes in these areas fell by 34.32 to 37.78 percent, with Modesto posting the third highest price decline.

Second to California in home price declines and number of cheap homes for sale are areas in Florida and the Las Vegas-Paradise area in Nevada. Home prices in the Cape Coral-Fort Myers and Naples-Marco Island areas in Florida decreased by 32.93 and 32.87 percent, respectively.

It is not surprising that home price indexes declined by the largest points in California and Florida in the fourth quarter of 2008 since these states have the highest foreclosure rates in 2008.