America’s housing crisis showed further signs of deepening yesterday as it emerged that builders began work on fewer new homes in August than at any time in the previous 12 years.

The number of housing starts fell by 2.6 per cent to an annual rate of 1.331 million last month, from 1.367 million in July, according to the Commerce Department.

The building rate is likely to decline further since the number of permits issued last month fell by 5.9 per cent to an annual rate of 1.307 million, another 12-year low.

Construction of single-family homes fell 7.1 per cent, to an annual rate of 988,000, its lowest since March 1993, but work on “multifamily” homes, such as apartment buildings, rose 13 per cent to an annual rate of 343,000.

These figures came a day after new data showed that foreclosures on mortgages in arrears leapt last month, to be 36 per cent higher than in July and up 115 per cent on the level a year earlier.

There were 243,947 foreclosure filings in August, accounting for one in every 510 households, with cities in California, Florida and Nevada showing the biggest increases, according to RealtyTrac, the research firm.

The legal process of foreclosure is typically begun when a borrower falls 90 days behind on mortgage repayments. Four in ten cases end in a forced sale or repossession of the house. Bank and borrower agree an alternative repayment schedule in remaining cases.

Separately, the Labour Department yesterday announced a surprise 0.1 per cent fall in consumer prices in August, after the housing crisis led to a decline in consumer spending that deterred companies from raising prices. The fall will ease fear that the Federal Reserve’s half-point cut in the basic interest rate on Tuesday may fuel inflation.

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