The residential construction spending rate declined for the 18th straight month in August, the U.S. Census Bureau announced today, hitting its lowest level since November 2003 and dropping 16.5 percent compared to August 2006.

The construction spending report heaps on more statistics reflecting a decline in the U.S. housing market — earlier this week the Census Bureau announced that the new-home sales rate in August hit the lowest level for that month since August 1995, dropping 21.2 percent compared to August 2006. And the median new-home price dropped 7.5 percent compared to August 2006.

Single-family housing starts in California have fallen about 35 percent for the first eight months of the year compared to the same period last year, as measured by building permits issued, the California Building Industry Association reported this week.

Building permits issued for single-family units in the state dropped 34.6 percent in August 2007 compared to August 2006, according to data compiled by the Construction Industry Research Board, a nonprofit research center.

Meanwhile, building permits issued for construction of multifamily units dropped 18.9 percent during the first eight months of the year compared to the same period last year, and building permits issued for multifamily construction in the state jumped 58.6 percent in August 2007 compared to August 2006.

Long-term mortgage rates continued higher this week on fears that the Fed’s recent move to make borrowing money more affordable would tempt sellers of Treasury bonds to raise their prices, in turn stimulating inflation, according to surveys conducted by Freddie Mac and Bankrate.com.

A popular misconception is that fixed mortgage rates take their cue from the actions of the Federal Open Market Committee, Bankrate.com noted. The past week is evidence that it rarely works that way. After the Fed cut short-term interest rates by a larger-than-expected half percentage point on Sept. 18, concerns about inflation began to percolate. Since inflation is the worst enemy of long-term bond investors, yields on 10-year government bonds moved higher, pushing mortgage rates — which are closely related to those yields — higher as well.

The rate of new-home sales hit a seven-year low in August and reached the lowest level for that month since August 1995, according to a U.S. Census Bureau and Department of Housing and Urban Development report released today.

The seasonally adjusted annual rate of new-home sales fell to 795,000 in August, down 21.2 percent compared to August 2006. That rate is a projection of a monthly sales total over a 12-month period, adjusted to account for seasonal fluctuations in sales activity.

Also, the median new-home price fell 7.5 percent, to $225,700, and the average new-home sales price dropped 8 percent, to $292,000, in August compared to the same month last year.

A bill that would give homeowners facing foreclosure a tax break when lenders forgive part of their debt would make up for lost revenue by collecting more capital gains taxes on the sales of some second homes claimed as primary residences.

HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, would eliminate a provision of the tax code that allows the IRS to tax debt that’s forgiven as part of a foreclosure or loan modification as income.