Housing starts plunge 16% in December

Housing starts fell 16 percent from November to an annual rate of 550,000, the lowest since the government started compiling statistics in 1959, the Commerce Department said yesterday. Building permits, an indicator of future projects, fell 11 percent to another record low.

Builders, which have lost three-quarters of their stock market value over the last three years, are slashing prices to compete with a record number of foreclosed homes coming onto the market as sales and credit dry up. President Obama's advisers say he will use up to $100 billion in financial rescue funds to ease the mortgage crisis.

"Homebuilders have no choice," said Ryan Sweet, who is an economist at the firm Moody's Economy.com Inc. in West Chester, Pa. "The market is bloated with excess supply, and demand is weak. The pace of housing starts will remain depressed until 2011." Economy.com projected starts would drop to a 580,000 pace.

Economists had forecast housing starts would drop to a 605,000 annual pace from a previously reported November rate of 625,000, according to the median of 69 forecasts in the Bloomberg survey. The figure for November was revised to 651,000 in yesterday's report.

Building permits fell to a 549,000 annual pace, lower than the 600,000 estimated.

Housing starts declined in three of four regions of the country, led by a drop of 25 percent in the Midwest. They rose 13 percent in the Northeast.

For single-family homes, starts dropped 14 percent to a 398,000 rate. Work on multifamily homes decreased 20 percent to an annual rate of 152,000.

US foreclosure filings in December were 41 percent higher than a year earlier, pushing up the inventory of unsold homes, RealtyTrac Inc., a seller of default data, said this month.

Obama's National Economic Council director, Lawrence Summers, last week said the president intends to use between $50 billion and $100 billion of the remaining half of the $700 billion bank bailout fund enacted last year to address the foreclosure crisis.