TBO.com - TBO is Tampa Bay Online

New-Home Construction Drops In September To 14-Year Low

ADVERTISEMENT

By MARTIN CRUTSINGER, The Associated Press

Published: October 18, 2007

WASHINGTON - Construction of new homes plunged to the lowest level in 14 years in September as turmoil in credit markets intensified problems in the housing industry. Consumer prices, meanwhile, rose at the fastest pace in four months, reflecting higher energy and food costs.

The Commerce Department reported Wednesday that construction of new homes fell 10.2 percent in September to a seasonally adjusted annual rate of 1.191 million units. The decline was more than double the 4.2 percent drop that analysts had been expecting, and it pushed activity down to the lowest level since March 1993.

The Labor Department reported that consumer prices rose by 0.3 percent in September, slightly more than the 0.2 percent that analysts had been expecting, as energy prices rose after three straight declines and food costs shot up at the fastest pace since June.

Core inflation, excluding energy and food, remained tame, however, rising by 0.2 percent, in line with expectations.

Analysts said the bigger-than-expected drop in housing construction could be signaling that the housing downturn, the worst in 16 years, may be headed for bigger troubles. Housing activity is now 30.8 percent below the level of a year ago.

The National Association of Home Builders reported this week that its index of builder confidence fell to an all-time low in October.

'Builders are in a panic mode and are trying to catch up with a rapidly falling market,' said Mark Zandi, chief economist at Moody's Economy.com.

The government report showed that applications for building permits, considered a good sign for future activity, fell sharply in September, dropping by 7.3 percent to 1.226 million units, also the weakest pace in 14 years.

Only the Northeast showed construction gains in September with activity rising by 45.4 percent in that region. Construction starts fell by 10.1 percent in the West, 11.7 percent in the South and 28.4 percent in the Midwest.

The 0.3 percent increase in consumer prices in September was the largest rise since a 0.7 percent surge in May. Energy costs were up 0.3 percent, while food costs jumped by 0.5 percent.

Analysts expect energy prices to rise even further in the months ahead, reflecting the fact that oil prices have been trading at record highs this week, close to $90 per barrel.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT