U.S. Housing Starts Fall to 17-Year Low, Permits Drop

By Shobhana Chandra, Bloomberg

Builders in the U.S. broke ground on the fewest houses in 17 years in July, signaling the residential- construction slump will continue to hurt economic growth.

The 11 percent decrease to an annual rate of 965,000, the lowest since March 1991, followed a 1.084 million pace the prior month, the Commerce Department said today in Washington. July’s level was higher than economists anticipated. Building permits, a sign of future construction, also fell.

The report will reinforce concern that stricter lending rules, rising borrowing costs, falling property values and record foreclosures will further depress home sales and cause builders to keep retrenching. Housing, job losses and the credit crisis may weaken the economy for the rest of this year and into 2009.

“There’s still a lot of excess inventory,” Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, said before the report. “Foreclosures are competing with builders, and that will keep builders on the sidelines for a while.” Read more….