Housing starts plunge, near a 10-year low (Rex Nutting)

Created by : Francis Goodwin View profile

The pace of building new homes is down 37.8 percent on year-over-year basis.

By Rex Nutting -- MarketWatch

Feb. 16, 2007 -- WASHINGTON -- U.S. home builders started the fewest homes in nearly a decade last month, as housing starts plunged 14.3 percent to a seasonally adjusted annual rate of 1.408 million, the Commerce Department reported Friday.

January's rate was the lowest for housing starts since August 1997. Starts were down 37.8 percent compared with January 2006, the largest year-over-year decline since early 1991.

Also, building permits dropped 2.8 percent to 1.568 million in January, 28.6 percent below the same month a year ago. Read the full government report.

The starts figure was much lower than expected on Wall Street, where economists were looking for a 2 percent drop to 1.60 million annualized units. The permits figure was close to the median forecast of 1.58 million expected in a MarketWatch survey of economists. See Economic Calendar.

Bonds rallied after the two reports, while the dollar fell. Stocks opened lower. See Market Snapshot.

The stunning drop in home construction indicates that builders are scaling back their plans on a massive scale, aiming to work down the excess inventory of unsold homes on the market.