The US housing slump is set to worsen after the level of new houses under construction and building permits both fell to a 14-year low.

Compared to September last year, the number of building permit applications - an indication of future activity in the US housing market - plummeted by 30.8 per cent and fell 7.3 per cent below August.

According to the US Department of Commerce, in the year to September, the number of new builds fell by 10.2 per cent to 1.191 million homes compared to forecasts that new house construction would reach 1.285 million.

Building permits fell 7.3 per cent, the sharpest decline since January 1995, to an annual rate of 1.226 million and 30.8 per cent below last year.

The number of new houses completed in September declined 8.2 per cent below August and a 31.1 per cent fall on last year.

The figures emerged the day after the Federal Reserve chairman, Ben Bernanke, warned that the housing market slump would remain “a significant drag” on US economic growth for months and that although credit market conditions had eased, significant risks remained.

He said: “Conditions in financial markets have shown some improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks.”

Meanwhile, Residential Capital, America’s second largest mortgage lender, today said it will but 3,000 jobs, or 25 per cent of its workforce, as it struggles to cope with the US housing slump.

Residential Capital, owned by GMAC Financial Services and dwarfed only by Countrywide Financial, said the job reductions will be spread across administrative and managerial positions.

Today’s job cuts add to the 2,000 redundancies Residential Capital made during the first half of the year.

The company said the reductions were “influenced by sharp downturns in the US residential real estate markets and the global dislocation of the mortgage finance and credit markets”.

Residential Capital said: “Severe weakness in the housing market and mortgage industry continues to prevail.”

The group expects to incur between $90 million to $110 million in restructuring charges.

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