updated 12/16/2008 8:49:09 AM ET 2008-12-16T13:49:09

The construction of new homes plummeted in November by the largest amount in almost a quarter-century as builders slashed production in the face of a recessionary economy.

Major Market Indices

The Commerce Department said Tuesday that new home starts fell to a seasonally adjusted annual rate of 625,000 from a downwardly revised level of 771,000 in October.

That is a drop of 18.9 percent, the steepest since March 1984. The total is far below the 740,000 pace that Wall Street economists expected.

Applications for building permits, considered a good sign of future activity, fell by 15.6 percent to 616,000, from an upwardly revised figure of 730,000 in October. Economists expected an annual rate of 700,000 permits, according to a survey by Thomson Reuters.

The housing starts and permit figures are at all-time lows, breaking records that were set last month.

Builders continue to be discouraged by the prospects of a housing turnaround amid what's likely to be the worst recession in decades, spurring rising unemployment and foreclosures.

More dour housing news came Monday, as the National Association of Home Builders/Wells Fargo housing market index held at a record-low level of nine in December for the second straight month.

"It is going to be a very cold winter indeed for homebuilders," Joshua Shapiro, chief U.S. economist for forecasting firm MFR Inc., wrote in a note to clients Monday.

Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and has been below 20 since April.

Builders began new single-family homes at an annual rate of 441,000 last month, the department said, 16.9 percent below October's figure of 531,000. That is the steepest drop in single-family home starts since January 1991.

Tighter lending standards, rising defaults and fear about the housing market's future have sidelined buyers, an absence felt acutely by homebuilders such as D.R. Horton Inc., Pulte Homes Inc. and Centex Corp.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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