Housing downturn extends to fourth year

By Timothy R. Homan  |   2008-11-20  |     NEWSPAPER EDITION

UNITED States builders in October broke ground on the fewest new homes and obtained permits for future construction at the lowest levels on record, signs the housing downturn may extend into a fourth year.

Construction starts on housing fell 4.5 percent in October to an annual rate of 791,000 that was the lowest since records began in 1959, the Commerce Department said in Washington yesterday.

Building permits, a sign of future residential projects, dropped 12 percent to a 708,000 pace, the lowest since at least 1960, Bloomberg News reported.

Builders mired in a three-year housing slump are finding it hard to attract buyers as property values drop and banks tighten lending standards. Declines in construction spending remain a drag on economic growth, increasing chances of a prolonged recession.

"Financing is drying up for builders and buyers, sales are increasingly dominated by foreclosed properties and falling prices are eating into builder margins," said Christopher Low, chief economist at FTN Financial in New York. "Starts are unlikely to stabilize until at least two of these conditions begin to improve."

Compared with October 2007, work began on 40 percent fewer homes.

Permits decreased more than forecast, compared with a 805,000 annual pace in the prior month.

Construction of single-family homes dropped 3.3 percent to a 531,000 rate, the report showed.

Work on multifamily homes, such as townhouses and apartment buildings, fell 6.8 percent from the prior month to an annual rate of 260,000.

The decrease in starts was led by a 31-percent decline in the Northeast. Construction dropped 13.7 percent in the Midwest, while starts in the West rose 7.5 percent and were up 1.5 percent South.