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.