Property prices are bound to fall. But can we avoid America's fate?

Farewell then to the property millionaires who made it up the ladder with "no money down". America's much-fabled housing boom is in freefall as prices continue to collapse at a record pace. Last month, the market shrank by 5.1 per cent as the value of US property fell to levels not seen since March 2005.

A soaring number of repossessions and stricter requirements for those seeking new mortgages caused prices to slump during the the third quarter of this year the first time since 1994. Sales of new homes were 23.5 per cent lower in October than they were a year ago, a government report revealed yesterday.

"The housing price boom that we witnessed over the last several years is gone and it is never coming back," warned Michael Darda, an economist at MKM Partners in New York. "Home prices will underperform for an extended period of time."

The latest round of bad news came in a report from the Office of Federal Housing Enterprise Oversight Prices, which said the price of previously owned family homes fell by 0.4 per cent between the second and third third quarters of the year.

The only upside to the slackness in the US housing market is that it has put a stop to the obnoxious television commercials which had for years helped to pump up sales with the lure of instant, property-backed wealth even for those without credit.

There is no more talk of "flipping" properties bought with "no money down", and the few buyers still in the market are finding it far more difficult to get a mortgage, according to the normally upbeat National Association of Realtors. "That light at the end of the housing-meltdown tunnel appears to be an oncoming train," said Joel Naroff, a housing economist. "With so many choices and so few buyers, the median sales price is cratering."

The number of people missing mortgage repayments is at a five-year high and many lenders have tightened their rules on loans even for their the most creditworthy customers the so-called prime borrowers. Repossessions almost doubled in October to 224,451. Many US homeowners are already trapped in negative equity because they bought at a time of historically low interest rates, poor lending standards and a frenzied property market.

Now they face the likelihood of prices falling even further. A look in the window of any estate agency reveals the desperation of those trying to sell their homes. Prices for many houses have already been slashed several times as the market collapsed and their owners faced higher interest rates resulting from the sub-prime mortgage crisis.

This month, vendors have begun slashing asking prices in the cities worst hit by the slump Washington, Miami, San Diego and San Francisco. According to one estate agency, ZipRealty, there are enough unsold homes on the market to satisfy demand for the next 11 months.

Even the most optimistic economists say it will take up to three years for the market to recover, or perhaps longer if house prices continue to fall as expected.

In southern California, the number of sales financed with mortgages of more than $417,000 has dropped by 60 per cent since the summer. Anyone without a large deposit is being squeezed out by rising interest rates.

PROMOTED VIDEO
News
Jamie and Emily Pharro discovering their friend's prank
video
News
i100
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
people
Life and Style
techApp to start sending headlines, TV clips and ads to your phone
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
Life and Style
tech
Arts and Entertainment
Daniel Radcliffe and Zoe Kazan in What If
filmReview: Actor swaps Harry Potter for Cary Grant in What If
News
Our resilience to stress is to a large extent determined by our genes
science
Travel
travel
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Pornography is more accessible - and harder to avoid - than ever
news... but they still admit watching it
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Techincal Accountant-Insurance-Bank-£550/day

    £475 - £550 per day + competitive: Orgtel: Senior Technical Accountant-Insuran...

    Sales Performance Manager, Gloucester - £290 p/day

    £200 - £290 per annum + competitive: Orgtel: Sales Performance Manager, Key Ba...

    Junior Database developer (SQL, T-SQL, Excel, SSRS, Crystal rep

    £25000 - £30000 per annum + bonus+benefits+package: Harrington Starr: Junior D...

    Java/Calypso Developer

    £600 - £800 per day: Harrington Starr: Java/Calypso Developer Java, Calypso, ...

    Day In a Page

    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
    Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

    Lauded therapist still in limbo as battle to stay in Britain drags on

    Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
    Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

    Lewis Fry Richardson's weather forecasts changed the world...

    But could his predictions of war do the same?
    Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

    'I want to have contact with the audience, not iPhones'

    Kate Bush asks fans not to take photos at her London gigs
    Under-35s have rated gardening in their top five favourite leisure activities, but why?

    Young at hort

    Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
    Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

    Beyond a joke

    Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
    The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

    The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

    Sadly though, the Lawrence of Arabia star is not around to lend his own critique
    Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

    A wild night out

    Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
    Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

    Comic Sans for Cancer exhibition

    It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
    Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

    Besiktas vs Arsenal

    Five things we learnt from the Champions League first-leg tie
    Rory McIlroy a smash hit on the US talk show circuit

    Rory McIlroy a smash hit on the US talk show circuit

    As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
    Boy racer Max Verstappen stays relaxed over step up to Formula One

    Boy racer Max Verstappen stays relaxed over step up to F1

    The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
    Fear brings the enemies of Isis together at last

    Fear brings the enemies of Isis together at last

    But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
    Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

    Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

    Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment