Housing Construction Falls to Three Year Low

According to the commerce department housing starts fell 6% last month to 1.655 million. The growth in new housing, which fueled the economy for half a decade is now declining. This raises concerns with leading economists that the slowdown will slow the rest of the economy. The Fed is expected to keep the interest rate at 5.25% when they meet on 09-20-2006 (the Fed did keep interest rates at 5.25% at their 09-20-2006 meeting).

New housing starts declined in all regions except for the northeast which was up 5.4%. There was a 12% decline in the midwest, 6.1% decline in the south and and 5.5% decline in the west. In the month of September building permits for new homes fell to 1.722 million from 1.763 million in the previous month. This trend is also causing inventories of unsold homes to rise.

Realtors forecast the median existing home prices will rise 2.8% this year to $225,900 after a rise in 2005 of 10.5%.

Source: Bloomberg 09-19-2006

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