MercoPress. South Atlantic News Agency

US housing market plunges to new lows

Construction of new homes in United States slowed in October to the lowest level in six years reported Friday the US Commerce Department. At seasonally adjusted annual rates the number of new homes started by builders was down 14.6% from September.

The report signaled that the months ahead could be equally bleak with the number of building permits issued falling for the ninth straight month (1.535 million), reaching its lowest level since 1997.

Economists believe the downturn may reduce economic growth this quarter after causing the expansion to slow to the weakest since 2003 in July to September. The US Commerce Department report also casts doubt on the Federal Reserve's assumption, expressed as recently as the minutes of October's meeting published November 15 that the housing slide won't spill over to the rest of the economy.

St. Louis Federal Reserve President William Poole told an audience in Wilmington, Delaware, Thursday that policy makers are paying ''special attention'' to housing, and that he's concerned about the number of would-be purchases being canceled.

Housing shaved 1.1% from economic growth last quarter. Gross domestic product increased 1.6% in the three months, the Commerce Department reported on October 27.

Construction of single-family homes fell 16% in October to a 1.177 million rate, Friday's report showed. Work on multifamily homes, such as townhouses and apartment buildings, fell 9.1% to an annual rate of 309,000. The decline was led by a 26% drop in the South. Starts also fell 12% in the Midwest and 2.1% in the West. However construction rose 31% in the Northeast. The number of homes under construction fell 2.3% in October to a 1.292 million pace. Housing completions dropped 3.8% to an annual rate of 1.953 million. The number of housing units authorized, though not yet started, decreased 2.5% to 200.200.

Higher mortgage costs and surging prices have put houses out of reach for many buyers. The 30-year fixed mortgage rate has averaged 6.48% during the second half of this year. The rate was 5.87% for all of 2005, according to Freddie Mac, the number 2 purchaser of home loans.