Official figures showed that the US economy grew at a strong 3.8% in the June quarter, before all the subprime turmoil hit in July and August, but the US housing slump continues to deepen.

Would it be too dramatic to call it a housing depression? Not after the latest figures released overnight.

American homebuilders are now holding more than 8 months supply of built but unsold houses on their books (and remember these are new and completed new homes: the figures for existing homes will be out in the next day or so).

And economists are now saying that the true extent of the slump in new homes is being understated in the official figures from the US Census Bureau. For example, the latest report does not take into account the rising level of cancellation rates or sales inducements that builders have reported in recent months.

According to the Census Bureau report, new homes sold at an annual pace of 795,000 in August, down 8% from the revised 867,000 sales level in July. It was the slowest pace of sales since June 2000 and was worse than all forecasts made ahead of the release of the report.

The Bureau’s report also showed the median price of a new home fell 7.4% from August 2006 to $US225,700, and the stockpile of new homes on the market rose to an 8.2 month supply. That fall in the median house price was the largest drop in the annual median price since 1970!

And according to a report in the Financial Times: “The US economy faces a 40 to 45 per cent risk of recession induced by the housing market downturn, the chief executive of Freddie Mac, one of the two quasi US Government sponsored mortgage insurers, has warned.”

And in London, the Telegraph reports that leading US investment bank, Goldman Sachs, has abandoned its ultra-bullish view of the world economy, warning of a likely recession in Japan and mounting risks that US property slump could spread to parts of Europe.

Goldman said in a report called, “The Global Economy Hits a Crunch”, that it was no longer sure that Asia and Europe would be able to make up for slowing US growth.