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Stabroek News

US home construction falls
published: Friday | August 17, 2007


A home listed as being in foreclosure on the California Housing and Urban Development website is seen in Huntington Beach on Wednesday. Home sales dropped more than 20 per cent over the past year as the number of foreclosures inched upward, a real estate research firm said Wednesday. - AP

WASHINGTON (AP):

Construction of new homes in the United States fell to the lowest level in more than a decade in July as builders continued to struggle with the steepest housing slump since 1991.

The Commerce Department reported yesterday that construction of new homes and apartments dropped 6.1 per cent last month to a seasonally adjusted annual rate of 1.38 million units. That was down 20.9 per cent from the pace of activity a year ago and represented the slowest pace since January 1997.

The housing industry, which had enjoyed a prolonged boom until 2006, has been struggling this year with a deepening slump as builders are slashing prices and throwing in various incentives in an effort to unload record levels of unsold homes. The problems have been worsened by rising home foreclosures, especially in the subprime market, a development which is dumping even more homes on to the glutted market.

In other economic news, the Labour Department reported that the number of newly laid off workers filing for unemployment benefits rose by 6,000 last week to 322,000. The increase was unexpected. Analysts had been looking for a decline of around 1,000.

The July drop in housing construction followed a 2.1 per cent rise in June, which had been driven by a big increase in apartment building.

Applications for building permits, considered a good barometer of future activity, fell by 2.8 per cent in July to an annual rate of 1.373 million units.

Housing construction fell in all parts of the country except the Midwest which posted a 2.6 per cent increase in July. Construction starts were down 11 per cent in the south, 3.7 per cent in the west and 1.3 per cent in the northeast.

The current housing slump is the worst since a downturn that occurred during an economic recession in 1990-91.

Overall economic growth has slowed but so far there has been no recession as other sectors have offset the weakness in housing. However, private economists say that the threat of a recession would rise if consumer and business confidence were seriously eroded by the current troubles in financial markets.

Investor confidence has been rocked over the past two weeks by spreading troubles in credit markets amid concerns about how many big hedge funds and banks will report serious credit problems.

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