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.

Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
world cup 2014
Popes current and former won't be watching the football together
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
Mick Jagger performing at Glastonbury
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
Germany's Andre Greipel crosses the finish line to win the sixth stage of the Tour de France cycling race over 194 kilometers (120.5 miles) with start in Arras and finish in Reims, France
tour de franceGerman champion achieves sixth Tour stage win in Reims
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

    £60000 per annum: Harrington Starr: A leading provider in investment managemen...

    AVS, JVS Openlink Endur Developer

    £600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

    Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

    £30000 per annum: Harrington Starr: A global leader in trading platforms and e...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
    Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

    Hollywood targets Asian audiences

    The world's second biggest movie market is fast becoming the Hollywood studios' most crucial