This crash started in America and it will only truly end in America. We, like the rest of the world, are mere spectators who bought too many tickets to the great US Sub-Prime CDO Bash. So, to get a sense of how bad things really could get, you have to understand what’s happening on the ground Stateside – and there is no better way of doing this than to listen to a wonderful US radio show out of Chicago called This American Life, hosted by Ira Glass. You can download the shows at www.thisamericanlife.org/radio_podcast.aspx or via Apple’s iTunes.

I listen avidly every week to understand just how devastating the Great American Recession really is. Week after week, Ira and his team look at bust banks, crashed property markets and dodgy developers – so it’s a priceless resource for any investor thinking about dipping into US markets.

Over the last few weeks, I’ve learned about the hedge fund managers who tour around the relatively nice middle class bits of New Jersey looking at homes that are part of much wider bundled mortgage security deals. And I’ve listened to an astonishing report about the apartment blocks in downtown Chicago where all but a few flats are empty, leaving one unfortunate tenant – the last in a “ghost block” – having to pay $3,000 a year in water bills because the developer has run away. Banks now own most of the other apartments and are in no rush to put anything on the market in case it reveals just how poor the asset prices really are!

I believe these reports are hugely relevant to us in the UK, partly because I have a nasty suspicion that many will soon be playing out over here – but partly because I believe some of you are considering a punt on the US property market, to judge by the e-mails I receive.

Last summer, one US property fund tried to list on the UK market with the aim of investing in the Florida market, but it didn’t get anywhere, to my knowledge. However, we haven’t had to wait too long this year for another to come along. It’s the Gibraltar-incorporated Paradigm Property Fund, open only to experienced investors willing to stump up at least $150,000. In total, it is hoping to raise about £15m with a simple pitch: by the time all the money has been raised, at the end of 2009, the US housing market should be bottoming out and opportunity will then knock.

If you’re a regular reader of this column, you won’t need me to quote the S&P Case Shiller (SPCS) 20 index showing that the US housing market is still falling fast and that we’re already a long way down from peak levels in summer 2006 (36 per cent down, the last time I looked). Nor will you need me to cite the experts who forecast that the US property market won’t bottom out until those declines hit 50 per cent.

But Paradigm’s boss Dominick Williams doesn’t deny that prices might fall further – in fact, he agrees that there may be another 5-15 per cent fall on the way. Instead, he reminds would-be investors that, even allowing for these recent declines, “based on rolling four-year investment periods, starting in each month since inception in January 1987, the SPCS-10 Composite Index has returned an average of 6.3 per cent per annum (37.7 per cent compounded over the average four-year term)”.

So Paradigm isn’t pinning its entire strategy on a reversal in the property market any time soon. Its aim is to create an extra margin of safety by buying in bulk at a big discount. The idea is that there are lots of bust (or close to bust) developers, banks and builders who are desperate to take cash for a job-lot of flats or middle class houses (preferably in master developments or gated communities with 50 to 200 units) in return for discounts of 50-70 per cent on the listed price.

Paradigm plans to build up a portfolio of such properties spread across the country and across a mix of property types and profit streams. One of the most potentially lucrative of these streams is renting out a small proportion of the flats to the US version of public sector housing associations, producing annual yields of 15-20 per cent. Other properties may simply be sold individually with discounts built into the price. Or they may be held until the market turns.

Williams quotes this example: a development in Florida with 40 units marketed at $400,000 per unit but with a likely market value of $160,000 to $180,000, of which 75 per cent are tenanted, with yields of close to 18 per cent a year.

Now, I salute Paradigm’s bravery but can’t help but worry that it is still too early – and that managers such as Paradigm may be out of their depth. Imagine what we’d think if a US-based hedge fund started buying blocks of apartments in Thamesmead or Leeds city centre? We’d all quietly snigger and suggest that it’s all about location, location, location – and these are the wrong ones.

Paradigm does have local US property experts working for it – but these are shark- infested waters where the dominant sharks have more money and local knowledge.

That’s why I’d rather access this story through the MacroShares US Housing index-tracking funds based on the Shiller index: the Major Metro Housing Up (NYSE ticker: UMM) and MacroShares Major Metro Housing Down (NYSE ticker: DMM). You don’t get the discounts from buying in bulk – but it feels a slightly safer bet at this point in the cycle.