The American housing market is continuing to decline and could suffer a record number of defaults in the second half of the year after bank repossessions more than doubled in March.

The owners of 234,685 American homes entered foreclosure in March, a 57 per cent jump, representing one in every 538 American households and a 5 per cent rise on February, when filings were 60 per cent higher than the year before.

Nevada, California and Florida were hit hardest after five years of soaring house prices, fuelled by borrowers taking out mortgages that they were increasingly unlikely to be able to repay.

Rick Sharga, of RealtyTrac, the housing research group that issued the new figures, said: “We are going to see quite possibly a record amount of foreclosure activity in the third or fourth quarter. What we are really looking at is ongoing fallout from people overextending themselves to buy homes they could not afford and using highly toxic loan products to get into the houses in the first place.”

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A foreclosure is a legal process that starts when a borrower falls 90 days behind on mortgage payments. About 40 per cent end in a forced sale or repossession of the house. The remainder reach an alternative payment schedule between bank and borrower.

Rising foreclosures will further depress prices by adding more houses to a market where supply already exceeds demand. This will further reduce the value of mortgage-backed securities and cause further losses among banks and other owners of the debt. This, in turn, will fuel the broader credit crunch and put more strain on the American economy.

Nevada had the highest foreclosure rate in March, at one in every 139 households, almost four times the national rate, according to RealtyTrac. The average house price in Las Vegas, Nevada, fell 6 per cent in 2007.

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