The bad news for the housing market just keeps piling up.

About 44% of the U.S. population lives in metropolitan areas where home prices are falling, according to the latest report on the dismal state of the real estate market.

Residents of Nevada are facing the largest average decline, with home prices expected to be down 4% on an annualized basis this year, says the report, which was made by the structured finance group at DBRS, an independent credit agency.

DBRS based the report on figures from the Office of Federal Housing Enterprise Oversight that track housing price data through June of this year, the latest period available.

While Nevada tops the list for average declines, California has the most cities expected to see at least 4% annual home price drops this year.

The region of Sacramento, which saw the first innings of the housing boom, will see an 8% drop in prices this year, the report says. San Diego, home to the condo boom, will see prices drop about 6%, while Oakland is expected to record a 5% decline.

Parts of the central valley region of the state -- cities like Stockton and Modesto -- will see declines greater than 10%, according to the report.

The issue is important not only for homeowners, but also for investors in the struggling residential mortgage-backed securities market.

"Although loose underwriting standards were a major factor precipitating the significant increase in delinquencies in the residential mortgage-backed securities (RMBS) sector, ongoing declines in (home price appreciation) trends and the contraction of capital to the mortgage sector may continue to exacerbate sector performance in the near term," said Sharon McGarvey, a structured finance research analyst at DBRS, in the report.

The ABX indices, which track the value of subprime mortgage loans packaged into mortgage-backed securities, are mostly at 52-week lows, according to data from Markit, a provider of credit-derivative financing information.

Hedge funds have profited on this demise this year by effectively shorting the bonds using credit default swaps that track different versions of the index. The riskiest piece of the index, the ABX-HE-BBB-, which tracks the lowest tranches of subprime loans issued in the second half of 2006, fell to a new low of 27.61 on Monday, down from the high of 102.19 over a year ago. It was losing another 4% to 26.50 Tuesday.

All this housing carnage continues to attract the attention of the federal government.

On Tuesday, Treasury Secretary Henry Paulson called "for an aggressive response to deal with an unfolding housing crisis that he said presents a significant risk to the economy," according to the Associated Press.

"Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy," Paulson said in a speech delivered at Georgetown University's law school, according to the AP. "The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."

On Monday, Federal Reserve Chairman Ben Bernanke said "the further contraction in housing is likely to be a significant drag on growth in the current quarter and through early next year."

Paulson's comments came on the same day that D.R. Horton ( DHI), the country's largest homebuilder by deliveries, reported a 39% drop in new home orders for the quarter ended Sept. 30. The decline was particularly disappointing because it came against easy comparisons from a year ago, when the housing collapse was already underway.

Also on Tuesday, the National Association of Homebuilders reported that its builder confidence index hit a new low in October due to continuing problems in the mortgage market and the oversupply of inventories.

The National Association of Home Builders/Wells Fargo Housing Market Index fell two more points to 18 in the month, the lowest point since the series began in January 1985. A number under 50 indicates that more builders view sales conditions as poor than good.

"Builders in the field are reporting that, while their special sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values," said NAHB President Brian Catalde in a statement.

Homebuilder stocks, which had been enjoying a revival in recent weeks, were mostly lower amid the latest round of bad news. D.R. Horton was falling 53 cents, or 3.9%, to $13.05, while KB Home ( KBH) was slipping 91 cents, or 3.3%, to 26.79. Lennar ( LEN) was losing 43 cents, or 1.8%, to $23.20, and Toll Brothers ( TOL) shed 49 cents, or 2.2%, to $21.66.