IMPEACH BUSH

Home builders in August began construction on the fewest homes in 12 years, the Commerce Department reported Wednesday.

The 2.6% decline, to a lower-than-forecast annual rate of 1.331 million, followed July's 1.367 million. Building permits dropped 5.9%, to a 1.307 million pace, also the lowest since 1995.

"We don't expect sales to bottom out until late this year, and prices will likely moderate even further," says John Silvia, chief economist at Wachovia.

Construction of single-family homes plunged 7.1%, to a 988,000 rate, fewest since March 1993, the report showed. But work on multifamily homes, such as town houses and apartment buildings, rose 13% to an annual rate of 343,000.

The decline in housing starts was led by a 38% plunge in the Northeast — the sharpest fall since 1990 — and an 18% drop in the West. Construction rose 11% in the South and 4.2% in the Midwest.

Falling real estate prices and subprime mortgage defaults are threatening to prolong the home-building recession, already the worst in 16 years. And with loans becoming harder to obtain for many, foreclosures will throw more properties back on the market.

The National Association of Home Builders/Wells Fargo index of builder sentiment has matched the January 1991 reading as the weakest ever. And construction companies are sweetening incentives to get rid of inventory.

Applications for mortgages, meantime, rose for a third consecutive week, the Mortgage Bankers Association said. The increase was led by applications for refinancings, underscoring an urgency among homeowners with adjustable-rate loans slated to reset to higher rates.