Foreclosures are taking their toll on home prices.

According to the Federal Housing Finance Agency (FHFA), U.S. home prices fell 7% on an annual basis in September, with the greatest decline happening on the West Coast. Home values dropped 20.5% in the U.S. Census Bureau's Pacific region, which includes California, Alaska, Hawaii, Oregon, and Washington.

California has been particularly affected by the foreclosure crisis; the state consistently posts one of the highest foreclosure rates in the nation and the largest number of foreclosure filings each month. In October, nearly 57,000 California properties received a foreclosure filing, according to RealtyTrac of Irvine, Calif.

"The impact of foreclosures and tightening credit conditions weighed heavily on house prices in the third quarter," said FHFA Director James B. Lockhart, adding that "recent public and private foreclosure prevention efforts … provide some hope for moderating the adverse effect of foreclosures on families and on housing markets."

FHFA recently announced a loan modification program for borrowers having trouble paying their mortgages. Fannie Mae and Freddie Mac also said they would suspend foreclosures on loans they own or guarantee until early January to give qualified borrowers more time to enroll in the FHFA program and, ideally, avoid losing their home.

Across the rest of the country, only one region—West South Central, which includes Oklahoma, Arkansas, Texas, and Louisiana—remained in positive territory. This four-state region posted a 0.5 percent gain for home prices.

The seven remaining regions of the country also posted negative numbers, but their single-digit declines did not come close to the plummeting values among the Pacific states.

Standard and Poor's also released its Case-Shiller home price indices today, which reported double-digit declines in major metro housing markets across the country. For those who watch both sources of home price data, it's important to remember that the FHFA home price index tends to show less dramatic drops than Case-Shiller for several reasons.  The FHFA data draws from a broader geographic area while relying on a more selective database of transactions; it only recognizes home purchases made with mortgages owned or guaranteed by Fannie Mae and Freddie Mac.

Alison Rice is senior editor, online, at BUILDER magazine.