Across the U.S., annual property prices dropped this year for the first time in decades. Sales of new homes initially rose against the trend by 16.2%, but this impressive figure was achieved only because developers lured buyers with huge discounts and incentives.

And with no domestic buyers in sight, developers are shutting show homes and suspending construction on partially-built communities. In a growing number of areas, owners can't shift their properties, even after steep price cuts. Meanwhile, more and more homes are coming on to the market and reducing prices further.

Recovery is not around the corner, with far too many properties chasing a dwindling number of buyers. After years of easy mortgages, especially to high-risk (subprime) borrowers, lenders have tightened their criteria for all borrowers.

'Low mortgage rates propelled wild buying activity. Carpenters and nurses were quitting their jobs to 'flip' property,' says Jonathan Miller, chairman of Radar Logic Research.

'Flipping' involves buying a property to sell on as quickly and profitably as possible. 'Mortgage underwriting was sloppy in the subprime markets, the prime markets and everything in between,' says Miller.

Sloppy is an understatement. Unaware of their actual mortgage terms and of the financial risks they were assuming, many subprime borrowers lost their homes; others are struggling to maintain payments. The subprime fiasco, which has not played itself out yet, dragged down the entire market.

For British buyers interested in a second home across The Pond, however, conditions are highly favourable: the pound is strong and it's a buyer's market. Or is it? While many areas have been hit by falling prices, others have remained strong.

http://www.thisismoney.co.uk/mortgages/homesabroad/article.html?in_article_id=421138&in_page_id=505