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Last Updated: Friday, 17 November 2006, 14:51 GMT
US house building at six-year low
Newly finished homes in Texas
Houses are not selling so fast as demand eases
The number of new US homes being built fell to a six-year low last month as housing activity slowed significantly, a Commerce Department report has shown.

About 1.48 million houses were started in October, 14% down from the previous month and 27.4% lower than a year ago.

At the same time, the number of permits awarded for future housing projects fell to its lowest level since 1997.

Successive interest rate rises since 2005 have dampened the market, as has a slowdown in the economy, analysts said.

'Soft landing'

The October housing numbers were considerably lower than industry experts had been expecting.

Economists had been hoping the housing market was set for a "soft landing" after the spectacular growth of the past couple of years.

I think there is a risk that the economy will underperform the Federal Reserve's expectations
David Sloan, 4Cast

Interest rates have been on hold at 5.25% for the past three months, leaving some analysts to believe borrowing costs may have peaked.

But the Federal Reserve, in the minutes of its latest interest rate meeting, intimated that the risk of inflationary pressures was more pressing than signs of cooling economic growth.

Figures published earlier this week showed that mortgage approvals were at a 10-month peak, while homebuilder confidence had picked up in the past two months.

One economist said the housing data looked "incredibly weak".

"We have seen some signs of manufacturing weakness as well as housing emerging," said David Sloan, an economist with financial analysts 4Cast.

"I think there is a risk that the economy will underperform the Federal Reserve's expectations."

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