US new home starts at 17-year low

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Construction of new US homes fell to a 17-year low in August, official figures show, in the latest sign of the problems in the US housing market.

The US Commerce Department said the number of homes that began to be built last month fell 6.2% to a seasonally-adjusted annual rate of 895,000 units.

The fall was steeper than expected, with analysts having predicted a drop of about 1.6%.

Analysts blamed rising foreclosures and falling demand for the sharp drop.

The slump in the US housing market has ultimately triggered the chaos on Wall Street. The world's biggest banks have seen billions of dollars in risky mortgage-backed investments become virtually worthless.

Earlier this month, the US Treasury was forced to effectively nationalise Fannie Mae and Freddie Mac, which together underwrite about half of the outstanding mortgages in the US.