U.S. house prices fell 0.5% in July after increases through the second quarter, according the Federal Housing Finance Agency monthly House Price Index (HPI). The July numbers follow 1.2% drop in July, revised from a 0.3% decline. The FHFA ssaid the unusually large revision was due to new data from later in the month "that show considerably weaker prices than earlier in the month." In the last year, house prices have fallen 3.3% and remain 13.8% below in the peak in April 2007. Jon Daurio, CEO of distressed loan purchaser Kondaur Capital Corp. warned earlier in the month that prices could drop another 20% as pricing chases demand to the bottom. The FHFA calculates the purchase prices of houses backing mortgages sold to or guaranteed by Fannie Mae and Freddie Mac, the two companies the FHFA holds in conservatorship. The biggest monthly drop in prices came in the South Atlantic Division, which includes Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, and Florida. Prices in the South Atlantic fell 1.6% in July. The largest increase came in the Pacific Division, which includes Hawaii, Alaska, Washington, Oregon, and California. Prices there increased 1.1%. Stocks turned down slightly this morning on the news of falling house prices. Write to Jon Prior.