New-home building off 10.2%

Construction slid to a 14-year low. But the Northeast was a bright spot, up 45.4 percent.

WASHINGTON - Problems in the housing industry intensified last month, with construction of new homes plunging to the lowest level in 14 years.

The Commerce Department reported yesterday that construction of new homes fell 10.2 percent last month from August to a seasonally adjusted annual rate of 1.191 million units.

That was the slowest building pace since March 1993. The decline was far greater than the 4.2 percent dip economists had expected.

Only the Northeast showed construction gains in September, with activity rising 45.4 percent in that region. Construction starts fell 10.1 percent in the West, 11.7 percent in the South, and 28.4 percent in the Midwest.

Applications for building permits, considered a good sign of future activity, also fell sharply in September, dropping 7.3 percent to 1.226 million units.

Analysts said the bigger-than-expected drop in housing construction could be a sign that the current housing downturn, already the worst in 16 years, is headed for bigger troubles. Housing activity is now 30.8 percent below the level of a year ago.

"The contraction in housing is transitioning from an average downturn to among the worst in post-World War II history. As the current downturn probes deeper depths, the risk of an outright recession will mount," said Michael Gregory, an economist with BMO Capital Markets.

Separately yesterday, Standard & Poor's said it had cut the ratings on 1,713 classes of investment securities, worth about $23.35 billion, backed by mortgages issued in the first six months of this year.

That massive cut in ratings created an uneasiness among investors that mortgage-sector problems still were worsening.

However, JPMorgan Chase & Co., despite losses from souring home loans and tough-to-sell corporate debt, posted earnings yesterday that beat Wall Street's expectations. The nation's third-largest bank said third-quarter profit had risen 2 percent, to $3.37 billion.

Housing sales, which had set records for five straight years through 2005, have been slumping since 2006. That decline has intensified in recent months as mortgage lenders have tightened standards for giving loans in response to soaring defaults. The higher defaults and the inability of prospective buyers to qualify for mortgages have contributed to record high levels of unsold new and existing homes.