Robert Shiller, the Yale university economics professor who accurately predicted the top of the internet boom, said today that there is a good chance that residential property prices will fall further than those sustained during the Great Depression when home values fell by 30 per cent.

His prediction contributed to a 134 point fall in the Dow Jones Industrial Average - a 1 per cent fall - along with a set of cautious corporate earnings data and the surging oil price that hit $119 a barrel earlier in the day.

Professor Shiller, who co-founded America's leading house price index - the S&P Case/ Shiller index - estimated that residential property prices in the US have fallen by 15 per cent since their peak in 2006.

His comments came after the National Association of Realtors (NAR) said that the pace of existing home sales had slowed again last month as the number of residential properties on the market swelled by 40,000 to 4.06 million. Such a level represents the extent to which the American property market is flooded with almost a ten-month supply of homes at the current sales pace.

According to the NAR, the average house price across the US fell 7.7 per cent last month to $200,700 compared with the same period the year before.

Dimitry Fleming, economist at ING, the Dutch investment bank, said: "House price deceleration shows now sign of easing, unemployment is rising, mortgage rates are still very high and confidence is at a 25 year low. In this environment, there is only a limited group of people brave enough to step back into the market. With that first wave now over, sales are entering a third down leg."

Traders were unnerved by quarterly figures from DuPont, the chemicals group and McDonald's, the biggest restaurant chain in the world. While both companies reported better than expected numbers, the burger chain admitted that like for like sales in March had fallen. DuPont conceded that the performance of its US business would offset earnings from its operations outside America.

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