Home prices in July fell a record low 5.3 percent compared same month last year. Prices went down 0.6 percent from June level and have ebbed to October 2005 levels. This was according to the Federal Housing Finance Agency.

Declines in home values nationwide together with the lapses in lending standards during the real estate boom are behind the continuing rise of mortgage defaults and foreclosures.

James Lockhart, the housing agency’s director, suggested Tuesday that government sponsored mortgage finance giants Fannie Mae and Freddie Mac loosen their lending standards to help more homebuyers qualify for a loan and stabilize the market. The government took control of Fannie and Freddie earlier this month.

Over the past year, the companies have tightened requirements and raised fees substantially, making it hard for borrowers with any blemish on their credit reports to qualify for a loan.

Also, more recent development was the Bush administration proposed $700 financial rescue package intended to help prevent the further credit crisis. The US government's financial bail out proposed by the President heated up in Congress Tuesday, with top finance officials urging its swift passage and lawmakers digging in their heels.

Housing markets finally looked like they might be stabilizing when the crisis on Wall Street hit last week, shattering many home buyers' resolve.