Properties in the UK saw an average of more than £6,000 shaved off their value in September.
Prices fell by 3.6% in the month, with the average value of a property falling from £168,124 to £162,095, worrying figures from Halifax show.
The fall is the steepest since the figures were first correlated in 1983, and are the clearest indication yet that the housing market is on a downward trajectory.
Prices in the third quarter of the year were down by 0.9% on the second quarter.
Evidence shows that housing market activity is softening, as Bank of England figures show that the number of mortgages approved fell for the fourth month in succession in August.
In fact, the month saw the lowest level of approvals for the last six months, at 47,372.
The declines have been caused, at least in part, by the reduced demand for property and an increase in supply, the opposite of which supported price gains in 2009.
Figures show that sales instructions are gaining pace, but that less people are in the position to buy a home.
"At the same time, renewed uncertainty about the economy and jobs has caused consumer confidence to falter recently, dampening the demand for home purchase," said Martin Ellis, housing economist.
"Together, these factors have been exerting some downward pressure on prices in recent months. In addition, volatility of the month on month measure has increased due to the low transaction levels across the market; this underlines the difficulty of getting a clear reading on the current state of the housing market.
"Prospects for the housing market remain uncertain. Earnings growth is expected to be very modest over the next year, tax rises are on the way and more people are putting their homes on the market. These will all be constraints on the market, dampening house prices.
"On the positive side, we expect interest rates to remain very low for some time, which will underpin the improved affordability position for homeowners."
The low interest rate environment has meant that typical mortgage payments for a new borrower have fallen from a peak of almost half their disposable earnings in mid 2007 to 30% in mid 2010.
This easing of repayments is thought to have been a key factor for keeping repossession and arrears figures down, and is cited as one of the main reasons for not implementing a rise in the base rate in the near future.
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