Housing construction falls

Hurricane Katrina had little impact on the August data since the storm hit late in the month, but analysts predicted a more adverse impact in September, reflecting forced shutdowns of construction sites in Gulf Coast areas hard-hit by the storm.

However, rebuilding in coming months should add to activity, but not enough to overcome an expected slowdown as higher interest rates finally start to dampen one of the economy's standout performers.

While analysts are not forecasting a repeat of the dramatic plunge in stock prices that occurred in 2000 with the bursting of a speculative bubble in the stock market, they are looking for a slowdown in price gains nationally and possibly price declines in the nation's hottest markets.

Ken Simonson, chief economist for the Associated General Contractors of America, forecast that the price of building materials such as lumber and cement will rise by 10 percent or more next year, reflecting demand pressures related to Katrina. That is up from a 6 to 8 percent increase in the cost of building supplies before Katrina hit.

The Bush administration has said it is considering cutting high tariffs that have been imposed on imports of softwood lumber from Canada and cement from Mexico to ease price pressures.

The country has recorded four straight years of record sales of both new and existing homes and economists believe even with a slowdown in the second half of this year, sales are still on track to set another record.