Tuesday, September 19, 2006


This is bad news.

Sept. 19 (Bloomberg) -- Housing construction in the U.S. declined more than forecast last month to the lowest level in three years as waning demand left builders with a growing number of unsold homes.

The 6 percent decrease in housing starts to an annual rate of 1.665 million followed a 1.772 million pace in July, the Commerce Department said today in Washington. Building permits dropped for a seventh straight month to the lowest level in four years and a sign home construction will keep slowing.

The battered U.S. housing market poses a risk of a larger slowdown in the economy and reinforces economist forecasts that Federal Reserve policy makers tomorrow will keep interest rates unchanged for a second month. Producer prices rose less than forecast last month, suggesting inflation is cooling along with economic growth, a Labor Department report showed today.

``There's no doubt the housing market is declining and we expect it to continue to decline through most of 2007,'' said Phillip Neuhart, an economist at Wachovia Corp. in Charlotte, North Carolina. ``Combined with the PPI data, it really sits with the Fed-on-hold scenario.''

The real risk to the economy isn't falling home prices IMHO - though that combined with ARM resetting could cause misery for a lot of people and certainly won't help the economy - it's the obliteration of jobs in housing construction.