The rate at which house prices are falling eased "significantly" this month but a market recovery still remains some way off, a mortgage lender said today.
The average cost of a home dropped by just 0.4% during the month, compared with a slide of 1.3% during October, according to Nationwide Building Society.
At the same time, the annual rate at which prices are falling eased to 13.9%, compared with a year-on-year drop of 14.6% a month earlier.
It is the first improvement in annual house price inflation since October last year, when the year-on-year rate at which prices were rising first began to decline.
The average home now costs £158,442, £25,000 less than a year ago, but still £25,000 higher than in November 2003.
Fionnuala Earley, Nationwide's chief economist, said: "In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market.
"The labour market is weakening, which will inevitably hinder market demand, particularly when property remains expensive relative to earnings.
"With prices falling at their current rate, there is also little incentive for new borrowers to hurry into the market."
The group said recent interest rate cuts would help a number of existing and new borrowers, while some of the measures announced in the Pre-Budget Report would also have an indirect impact on the market.
But it said the biggest impact on the housing market was likely to be the Chancellor's response to the Crosby Review on mortgage finance.
Former Halifax Bank of Scotland boss Sir James Crosby recommended that the Government should provide temporary guarantees for mortgage-backed securities to get the market for the product, which dried up in the wake of the credit crunch, moving again.
This initiative should be accompanied by changes to increase the transparency of new mortgage-backed securities, and a review of the fair value accounting principle to be carried out by the International Accounting Standards Board.
But he warned that there was a real risk that the current mortgage shortage could cause the house price correction to "overshoot", adding that it was very likely that new net mortgage lending would fall to below zero in 2009.
Ms Earley said: "If funds once again became more freely flowing as a result of Crosby's recommendations, this could stimulate levels of activity in the market and thus help to promote a swifter recovery.
"While there is still a great deal of uncertainty about the appetite of investors for mortgage-backed securities, a Government guarantee may be the catalyst required to restart this market and begin to add liquidity, especially as affordability is now improving."
But she added that not all of the current lending limits, such as the higher deposits being demanded, were being caused by the problems in the wholesale money markets, with some due to the slowing economy, falling house prices and more accurate pricing of risk.
Howard Archer, chief UK and European Economist at IHS Global Insight, said: "We doubt very much that the markedly reduced monthly drop in house prices in November marks the start of an improving trend for house prices as the fundamentals remain largely unfavourable.
"Furthermore, you are always likely to get fluctuations around a trend and house prices can be very volatile on a month-to-month basis.
"Ongoing very tight credit conditions, still relatively stretched housing affordability on a number of measures, recession, faster rising unemployment and widespread expectations that house prices are likely to fall a lot further form a powerful set of negative factors weighing down on the housing market."
Seema Shah, property economist at Capital Economics, agreed.
She said: "November's moderate fall in house prices is not a sign that the housing market is bottoming.
"With the economy set for a deep recession and unemployment rising steeply, we expect the sharper downward trend in house prices of recent months to reassert itself."Reuse content