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Last Updated: Tuesday, 20 November 2007, 14:35 GMT
US new homes building still weak
New home being built in California
The level of US homes construction is still much lower than last year
Construction of new US homes recovered slightly in October from September, but was still down sharply compared with the same month last year.

The level of new residential building work rose 3% in October compared with September to 1.229 million units, the first monthly increase since June.

However, the amount of new home construction last month was still 16% lower than that seen in October 2006.

The problems in the housing market have started to hit the wider US economy.

Lowest since 1993

While October's monthly rise in new homes building was the biggest gain since February, the pace of awarded building permits fell sharply.
There's a massive over supply, right now the mortgage market is tightening up, and people are running away from a free-fall
Doug Roberts, Channel Capital Research

The amount of new building permits - a sign of future construction activity - fell 6.6% in October, the biggest monthly decline in 14 years.

Construction of single-family homes also fell for a seventh straight month, declining by 7.3% in October compared with September, as potential new home owners are either struggling to get on the housing market or choosing to wait.

Doug Roberts, chief investment strategist at Channel Capital Research, said the latest figures from the Commerce Department would not offer much comfort to the struggling housing market.

"There's a massive over supply, right now the mortgage market is tightening up, and people are running away from a free-fall," he said.

US house prices have fallen this year, with the downturn centred on the crisis in the so-called sub-prime mortgage sector, which offers higher risk loans to people with poor credit histories, or those on low incomes.

Against a backdrop of higher US mortgage rates, loan defaults in the sub-prime sector have hit record highs.

This has knocked confidence in the wider US housing market, and also caused a credit squeeze as a growing number of US banks reveal their exposure to sub-prime bad debt.

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