US housing picked to hit record low

American builders probably broke ground in December on the fewest houses on record as sales and credit dried up, economists said before reports out this week.

Housing starts fell 2.7 per cent last month to an annual rate of 605,000, the lowest level since the Commerce Department started compiling data in 1959, according to the median estimate in a Bloomberg News survey. Building permits, a sign of future projects, also probably dropped to a record low.

Builders, whose shares have lost 76 per cent of their value over the last three years, are slashing prices to compete with a record number of foreclosed homes coming on to the market. In recognition of the need to stem the housing slump, Barack Obama's advisers say the President will use up to $100 billion ($187 billion) in financial-rescue funds to ease the mortgage crisis.

"Starts and permits will continue to drop over the first half of this year," said Nigel Gault, chief United States economist at IHS Global Insight in Lexington, Massachusetts. "A second half rebound is likely, provided financial markets continue to thaw and interest rates remain low."

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Posted: 21 Jan 2009

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