The meltdown of the US housing market is not over yet and property prices will soon start falling again as a flood of foreclosures looms, it is claimed.

Mark Zandi, chief economist at Moody's Economy.com is predicting that foreclosure sales will pick up again in the New Year and as a result property prices will resume their decline.

The US housing market has suffered the worst downturn since the Great Depression and its impact has rippled through the recession hit economy as well as the rest of the world. A setback for the real estate market could portend problems for the US economy as a whole.

Property prices in many regions have been rising in recent months as foreclosure sales declined during the summer months and mortgage servicers have tried to put those facing losing their homes into the government's affordable home loan programme so that they don't lose their property.

Zandi though is not confident this will continue. 'The housing crash is not over yet. Foreclosure sales will increase and home prices will resume their decline by early 2010 as mortgage servicers figure out who will not qualify for a modification loan,' he explained.

Property prices, as measured by the Standard & Poor's/Case-Shiller US National Home Price Index, will trough in the third quarter of 2010 after declining 38%, Zandi added.

Some 7.5 million foreclosure sales will have taken place between 2006 and 2011. The majority of these sales, however, have not emerged yet, with 4.8 million foreclosure sales expected between 2009 and 2011, he is predicting.

Zandi said another significant obstacle to a housing market recovery is the number of mortgages that are underwater, where borrowers owe more for the loan than the residence is worth. This negative equity disqualifies many homeowners from refinancing and prevents some from selling their homes. Borrowers in negative equity are also more prone to defaults and foreclosures.

Overall there are also concerns about the effect of unemployment on the real estate market. The US Labor Department said the unemployment rate reached a 26 year high of 10.2% in October and most experts predict it will not improve in 2010. Zandi believes it will peak at 10.5 in the third quarter of the year.

At the same time demand for mortgages is declining. The latest figures from the Mortgage Bankers Associations show that demand is close to record lows with total applications falling 4.5% in November.