It sounds like a skin infection.
There is always bacteria on the skin. All it takes is a break in the skin for bacteria to enter the deeper layers of skin and cause an infection.
I am still suspicious of flea bite dermatitis because of the location of the rash and the hair loss there. If he is allergic to flea saliva it would just take one flea bite for him to have a big allergic reaction.
The flea shampoo only washes off the fleas that are on him at the time of the bath. As soon as he is dry, the fleas are free to jump on him again. The best thing to use are "frontline" or "advantage" drops each month. They are over the counter now and you can get them at pet stores and online.
He could have food allergies as well.
To determine if it is food allergy the patient is put on a hypo allergenic diet (hills z/d) for 4-6 weeks. During this time you can not give any other food or treats. Doing so will ruin the test. After 4-6 weeks the patient is put back on the regular diet. If the skin flares up again you know food allergens are the cause of the skin problems.
www.veterinarypartner.com/Content.plx?P=A&A=652 food allergy
www.veterinarypartner.com/Content.plx?P=A&A=468 food allergy
Atopy is when the patient has become allergic to normal substances such as pollen, mold, and dust mites. The symptoms can be controlled and prevented but it can not be cured. There is a blood test that can be done to see what she is allergic to. If desired she can be given allergy shots to hypo sensitize her to the allergens. The allergy shots are 50-75% affective.
You can try benadryl at a dose of 1mg per pound of body weight every 6-8 hours as needed. So if he weighs 50 pounds, for example, you would give 50 mg of benadryl every 12 hours.
You can also spray hydrocortisone spray on the affected areas 3-4 times a day to help control the itching and inflammation.
You can apply neosporin antibiotic cream to the affected skin 3 times a day as well to help fight infection.
If he is not improving in 2-3 days, he will need to see a vet and get oral antibiotics to treat a skin infection.
I hope this helps.