WASHINGTON -- The latest Housing Starts report, showing a drop of 10% for the month in the building of new homes has raised the red flag of recession. The annual level is now 1.19 million, compared to a 1.33 million rate in August, down nearly 31% from a year-ago, making it the worst in 14 years.
CNNMoney.com quoted CUNA's Chief Economist Bill Hampel, who posited that housing problems raise the chance of an economic recession to 40% as the overall economy is dragged farther down by the slumping housing market.
"What I had always thought is that we would have a long, flat bottom for the housing market, but it is now apparent that the contraction is sharper than that," he said. "It raises the chance it [the slowdown in housing] will have an impact outside of the housing market."
Hampel predicted that The Fed would likely have to react by cutting rates at its Oct. 31 meeting. The stronger than expected jobs report in September isn't enough to put confidence back into the system without another cut from the Fed, which cited the housing slowdown when it announced its first rate cut in four years last September.
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