Single-family construction spending fell by more than 5 percent for the third straight month, as money spent on new homes dropped to $233.6 billion in January from $246.4 billion in December 2007.

Spending on single-family new homes dropped 32 percent year-over-year from $344.3 billion in January 2007.

Research group Global Insight said that today's news coupled with the latest housing starts and housing permits numbers point to similar-sized drops in spending over the next two to three months.

Spending on multifamily units dropped for the 14th month in a row and was down 18.6 percent from a year ago.

Global Insight expects residential investment to slash real GDP growth by 1.6 percent in the first quarter of 2008, and by 1.1 percent in this year's second quarter.

"The bite from housing will get progressively smaller afterward," said Patrick Newport, U.S. economist for Global Insight, who predicted that residential investment will make a rebound, making a small contribution to growth in 2009.

Overall, total construction spending was down 1.7 percent in January to $1.1 trillion, the fourth straight monthly drop, while total residential construction was off 2.9 percent, down to $462.8 billion.

Total construction spending was only down 3.3 percent year-over-year compared to January 2007, as strong gains from public and private non-residential have mostly offset the huge drag in the residential housing sector. However, Global Insight expects all three categories to contract through most of 2008.

"January's disappointing numbers are a preview of things to come" Newport concluded.