Construction of new homes falls 24.8% in 2007, the largest amount in 27 years

Associated Press - January 17, 2008 9:13 AM ET

WASHINGTON (AP) - Construction of new homes fell in 2007 by the largest amount in 27 years.

The Commerce Department says construction began on 1.353 million new homes and apartments last year, down 24.8% from 2006.

It was the second-biggest annual decline on record. The biggest was a 26% plunge in 1980, when the Federal Reserve was pushing interest rates to post-World War II records in an effort to combat inflation.

Many economists believe that the current slump in housing will rival the dive in the late 1970s and early 1980s when housing construction fell for four straight years. It finally began to recover after the severe 1981-82 recession.

For December, construction fell by a bigger-than-expected 14.2%.