Housing starts in August fell 2.6 percent to a seasonally adjusted annual rate of 1.331 million, the lowest mark since June 1995 according to data released today by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau. The report also reveals that building permits fell 5.9 percent (to a seasonally adjusted annual rate of 1.307 million), also the lowest since June 1995. Single-unit starts dipped 7.1 percent, which marks a 14-year low.

"The key statistic in the report is the single-family permits estimate," said Global Insight Economist Patrick Newport. "This number matters more than housing starts because it is much better measured (so it is less volatile and more trustworthy), is less influenced by weather, and represents a bellwether for future construction activity.

"The housing market has been in recession for nearly two years," Newport continues. "As miserable as the downturn has been, it is likely to take a turn for the worse over the second half of the year because of the recent turmoil in financial markets. When will housing turn around? Our view remains that this will not occur until 2008. Until then, the news will remain grim."

Over the past year, housing starts in the U.S. have dropped more than 19 percent with permits falling nearly 25 percent.

View the full report here.