Following a 0.1 per cent fall in Octover, average values fell once again in November by a slightly larger 0.2 per cent.
The year on year rate of growth has now fallen back to +3.6 per cent, the lowest rate of growth since July 2006.
Prices fell across 20 per cent of the country with half these falls concentrated in southern England where demand has slowed most over the last few months.
"Continuing media focus on the fall out from the credit squeeze, along with relatively high interest rates is resulting in widespread caution among homeowners, the majority of whom do not need to move and who are sitting back until the outlook becomes clearer," comments Richard Donnell, Hometrack's director of research.
"As a result the Christmas slowdown looks to have started early but the underlying market conditions remain weak with new buyer registrations down by 26 per cent over the last 5 months.
"While the downward pressure on prices is coming from the demand side, values are being supported by a continued tightening in supply, with levels of housing for sale contracting by a further 2.9 per cent over November.
"While the economic fundamentals remain strong it is hard to see the catalyst for any short term turnaround in market confidence other than interest rate cuts early in the new year."
The largest falls in new buyer registrations were seen in southern England. With those in London, South West and the East were down by over a third, while in the South East they were down by closer to 40 per cent over the same period.
The largest monthly fall at a regional level was in the East Midlands (-0.3 per cent). Elsewhere there is a mixed picture of weak demand and static prices.
Donnell continued: "Away from the south of England, the market has been relatively weak over the last 18 months and there is little, if any, 'froth' in current pricing levels. Buyers in these regions are more interest rate sensitive and it is affordability pressures that are having the greatest impact on demand."
The turnaround in market conditions has resulted in an increase in the average length of time a property stays on the market - up to 8 weeks in November from a recent low of less than 6 weeks back in the spring. The time on the market is set to rise further in the months ahead and could well break through the 5 year high of 8.1 weeks last recorded in January 2006.
