The world's biggest economy is spiralling rapidly into deep recession after house prices across America sank at their fastest rate on record, according to a survey widely perceived as the most authoritative measure of US residential property values.

The S&P Case-Shiller house price index indicated that the average value of a residential property in the United States has fallen by a quarter since the peak of the housing market in 2006, with every homeowner losing about $370 (£260) a week from the value of their home.

Property prices throughout the US fell by 18.2 per cent in November, compared with the same month the year before - indeed, home prices fell by 2 per cent in November alone. Wall Street had been expecting the numbers to be slightly worse, forecasting an 18.4 per cent drop.

At the same time, the US Conference Board's consumer confidence index fell well below expectations in January, after Americans failed to take heart from falling petrol prices and a more stable US equity market.

The index measures the level of optimism that Americans express about their own finances.

It is scrutinised by Wall Street because it is used to try to determine future consumption levels, a key driver for the US economy, with consumption accounting for about two thirds of America's economic growth.

Ian Shepherdson, chief US economist at High Frequency Economics, estimates that the consumer confidence index reading spells a “catastrophic” rate of decline in overall consumption, down 3 per cent over this year compared with last.

Consumer spending, which includes expenditure on services and on items such as food and clothing, accounts for about two thirds of US economic growth.

The grim housing data showed that the rate of decline of property values is accelerating. November's 2 per cent fall in prices compared with 1 per cent monthly declines during the summer.

While Wall Street is banking on low interest rates and sliding home prices to entice new buyers into the property market, the losses raise questions about the valuation of the mortgage-backed securities on their balance sheets, which may need to be entirely written off in the short term.

Such doubts further undermine confidence in global equity markets.

David Blitzer, chairman of the S&P Index Committee, which compiles the house price index by monitoring 20 cities across the US every month, said: “Since August 2006, the 20-city composite has declined every month - a total of 28 consecutive months.”

In November, the average house price across America fell to similar levels as the first quarter of 2004.

Phoenix, Arizona, and Las Vegas, Nevada, were hit worst.

The slump in property values also threatens to affect employment, with 7.2 per cent of the American workforce out of a job.

The construction industry and retail are closely allied with the housing market.

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