Page last updated at 13:25 GMT, Friday, 17 October 2008 14:25 UK

US home building at 17-year low

US homes being built
The US housing market is experiencing a sharp downturn

Construction of new US homes fell more than expected last month to reach its lowest level in almost 18 years, Commerce Department figures have shown.

The number of new houses and apartments being built in September declined 6.3% compared with the same month in 2007.

This fall was much more severe than the 1.6% dip that analysts had expected.

Analysts predict that housing construction will fall throughout 2009, and only grow again when the banking sector and wider economy recover.

Not only is housing demand falling, but builders can't get credit to build homes
Mark Zandi, Moody's

Until then, would-be new homeowners are finding that they either cannot afford to get their first mortgage, or that banks are reluctant to lend.

Without these would-be customers, homebuilders are cutting back on the number of new houses they build.

'Slide continuing'

The report showed that starts on new homes in September fell to a seasonally adjusted annual rate of 817,000 units, the slowest pace since January 1991.

The fall in the construction of one-room apartments was even more pronounced, falling 11% from a year earlier to an annual rate of 544,000, the lowest figure since August 1982.

The study added that the downturn in construction was most notable in the north-east of the country.

Mark Zandi, chief economist at Moody's said the fall in construction was "a significant weight on the economy".

"Not only is housing demand falling, but builders can't get credit to build homes," he added.

"The slide in construction will continue into next year."

Fellow analyst, Peter Kenny of Knight Equity Markets, added that construction levels will not rise again until the current glut of unsold properties is sold.

"The housing inventory overhang needs to be digested in order for us to move forward," he said.

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