The recently released data from the National Association of Realtors are more evidence of the continuing slump the US property market.

The euro hit new highs today on the news, surging to $1.60.

“In the United States and in the United Kingdom, it is clear that the housing boom has been a bubble,” says Lord William Rees-Mogg in Whiskey and Gunpowder.

“In the United States, the bubble has already burst — the only question is when the US housing market will reach its low point. Britain is following the same track, but is somewhere between six and twelve months behind.

“The fall in the house market has wiped out very important assets of the banking system, leading to the collapses of Bear Stearns and Northern Rock and the distress of other banks. It is difficult to put a figure on the contraction of credit that has resulted.

“The I.M.F. has suggested $1 trillion, which is an impressive round number. What has actually been lost is a multiple of the fall in house values, since there is a multiplier effect on credit and on the willingness to lend.

“A bank which has lost a billion dollars in the housing market, or some derivative of the housing market, will feel itself to be short of capital and will seek to draw in as much cash as it can. It may well go from over-generous lending to exaggerated borrowing, which will take it from being a net lender to being a net borrower.”

The NAR pending home pending home sales index, a leading indicator of existing home sales, dropped 1.9% in February. The index is down 21.4% from the February 2007 level.

There has been plenty of shrill calls for government to intervene in the housing crisis, but what can – or should – government do?

“All through the boom, the bulls were claiming that the super-sized house price growth was based on fundamentals, and had nothing to do with slack lending practices,” says John Stepek in MoneyWeek.

“If they’re right, then prices shouldn’t fall very far before the fundamentals pick them back up again. If they were wrong, then house price gains were a bubble based on rampant speculation. Those bubbles need to be allowed to pop, so that people don’t keep throwing good money after bad.

“Of course, the reality is that many of the bulls knew this was a bubble. They just thought it was too big to blow. More than a few people used to argue that “the government will never let the housing boom end. It’s too important to voters.

“They will soon be reminded that there are few things less worthy of your faith than governments. For all its efforts, the Federal Reserve still hasn’t prevented US house prices from diving by more than 10%. Our leaders can’t hope to do any better.”