Construction of housing plummets

WASHINGTON -- Housing construction plunged in October as builders slashed activity to the lowest level in more than six years.

Further declines were expected as the five-year housing boom turns into what is being described as a "housing recession."

Construction of single-family homes and apartments dropped 14.6 percent to an annual rate of 1.49 million units, the slowest pace since July 2000.

The news was even more stark for building permits, which fell for a record ninth consecutive month, dropping 6.3 percent to an annual rate of 1.54 million units, the slowest pace in nine years.

"A tornado hit the housing sector in October," said Joel Naroff, chief economist at Naroff Economic Advisors, a private forecasting firm. "Builders have seen the light from the housing market meltdown and are now moving as rapidly as possible to reduce supply."

Housing, which had been one of the economy's standout performers during a five-year boom, shaved about a percentage point off growth in the July-September quarter.

That pushed overall economic activity as measured by the gross domestic product down to an anemic rate of just 1.6 percent, the slowest growth in more than three years.

Many economists predicted that GDP growth would be trimmed by a similar amount in the current quarter as housing continues to act as a drag, through lower sales and reduced building activity.

With inventories of unsold new and existing homes near record levels, many analysts said the slump in housing was likely to last for a number of more months, possibly until the middle of next year.

Analysts said the fallout from the housing weakness should not be enough to push the country into an outright recession unless home prices drop sharply on a nationwide basis, triggering a cutback on consumer spending because homeowners suddenly feel less wealthy.