Housing starts dropped to an annual rate of 918,000 in September, virtually assuring 1981 will mark a postwar low, the Commerce Department reported yesterday.
In another indication the economy has fallen into a recession, the government also reported a drop in factory use in September.
The home-building industry has been in a severely depressed state for 34 months with little indication it is likely to pull out of the slump soon.
"Builders are at the end of their ropes and will be forced out of business in the next few months unless interest rates decline immediately," predicted Herman J. Smith, president of the National Association of Homebuilders, adding that prospects for such a decline "are slim."
September home starts declined 1.7 percent from the August level of 934,000 and dropped 38 percent from September 1980's figure of 1.482 million. But last year's figures were depressed, too.
Total starts this year are likely to be about one million units, just about half the number in 1977 and 1978, according to the homebuilders association.
Mark Riedy, vice president of the Mortgage Bankers Association, predicted housing starts will continue their decline for several months. "Builders have just given up," he said.
Building permits also fell slightly from an annual rate of 865,000 in August to 844,000 in September, the Commerce Department reported.
President Reagan acknowledged on Sunday that the economy has fallen into a recession, one he said he hoped would be short.
That admission prompted House Speaker Thomas (Tip) O'Neill (D-Mass.) to blame the economic slide on "a premeditated program of high interest rates, tight money and recession" by the administration.
"Instead of the promised Reagan recovery, we have been given the Reagan recession," O'Neill said.
Members of the housing industry also blamed Reagan for an antihousing attitude.
"We have had a depression in housing . . . something that the previous administration ignored and something the current administration seems content to accept and live with for an unspecified length of time," said Jack Carlson, chief economist for the National Association of Realtors.
The President's Commission on Housing, meanwhile, approved an interim report but left the issues of housing construction and finance to future consideration. The report's main recommendation is to replace federal subsidies for low-income housing construction with direct housing grants to the very poor.
The recession is blamed largely on soaring interest rates, particularly as they affect the home-building and automobile industries.
Laurence A. Kudlow, assistant director for economic policy at the Office of Management and Budget, meanwhile predicted a weak fourth quarter and said he did not expect to see a sustained decline in interest rates until more spending cuts are approved.
The construction industry slump already has caused one million workers to be unemployed--16.3 percent of the industry--the homebuilders association estimated. The association expects that to increase to 21 percent in the next few months.
In further evidence of a recessionary slide, the Federal Reserve Board reported that factory use last month declined to 78 1/2 percent of capacity from 79.3 percent in August.
The factory-use figures were the lowest since October 1980 and showed sharp declines for iron and steel producers.