An economic outlook released today by Global Insight predicted that construction of new homes in the United States this year will dip to the lowest levels since World War II. One of the main problems: Financing. According to the Global Insight release, “Many regional banks, which homebuilders depend on for financing, are running into problems because of rising delinquency rates. Even banks with solid balance sheets are reluctant to finance any project related to housing.”

Construction is off locally. In the second quarter, which includes all of April, May and June, permits issued to build houses (excluding condominiums) in the county dropped by 53.9 percent compared to the same period last year, according to statistics provided this afternoon by Bill Riley, vice president of government affairs for the Washington Realtors and an owner of GMAC Real Estate in Puyallup. For some additional perspective, I wrote in May about local builders leasing unsold homes, rolling out the incentives and slowing construction as they grapple with today's market.

Subprime loans catching the heat for housing market problems was so 2007. This year’s financing poster child for excess and irresponsible lending, according to BusinessWeek: the home-equity loan.

In fact, the magazine has dubbed what’s to come “the home equity crisis.” Overblown?

Here’s what the magazine has to say:

Buoyed by rising prices, borrowers increasingly tapped into the equity on their properties to finance a new car, renovations, or even a down payment, making equity a key source of consumers' strength. But with the housing market in disarray and prices plunging, the business of home-equity lending is souring. At least $14.7 billion in loans and lines of credit were already delinquent through the end of September—the highest level in a decade. "After subprime, home-equity lending is the biggest problem the industry has right now," says analyst Frederick Cannon of Keefe, Bruyette & Woods.

What's more, there's little that can be done to prevent the pain from the deterioration of this $850 billion market. A lender on a mortgage has the first claim on the underlying property. In the case of foreclosure, it can sell the property and recoup some money. The bank with the home-equity piece has no such collateral and is usually out the money. "The home-equity lender is going to get hosed," says Amy Crews Cutts, deputy chief economist at mortgage giant Freddie Mac (FRE).

The full story goes on to label some home-equity loans “toxic” but ones that were made with confidence during the boom because prices were rising so rapidly.

Like many of the other factors, such as diving prices and swelling inventory, that are far worse in markets elsewhere, I’m guessing difficulties associated with home-equity financing won't be nearly as severe here as elsewhere. But just like other national problems, issues with home-equity loans today could impact your ability to get one down the road. Any thoughts?

Here’s another in the ever-growing collection of questionable marketing tactics: A home loan disguised as a supposed mortgage-insurance refund. This one, from a colleague’s mailbox, looks official. “Form 769-OH” comes with a recipient ID number, cites two sections of the Consolidated Appropriations Act and says the recipient has “a marked record on file.”

This particular ad suggests that the homeowner could be due a refund of the mortgage insurance paid on an FHA loan. Yes, an FHA loan was used to buy the house. And, yes, mortgage insurance also was used. But does this company want to procure a rebate? Tiny print in light-gray ink says (66 words into a fairly dense paragraph): “This is a solicitation for a home loan.”

Anthony Carter, an enforcement attorney for the consumer services division of the state Department of Financial Institutions, said he’s investigating two cases where money back on mortgage insurance appears to be used to lure callers. He didn’t see the ad sent to my colleague, but he said the others he's seen tend to target VA or FHA loan holders and end up pitching new home loans or a refinanced mortgage, which he called deceptive.

“It’s promising something they can’t really deliver. They’re not in the business of getting money back from the government. They’re in the business of making loans,” he said.

Here's a look at the flier:

Bloomberg reported today that a real estate market forecast from Freddie Mac has equal-opportunity bad news.

U.S. home sales in 2007 will drop to their lowest level since the start of the five-year housing boom in 2001 as mortgage rates and foreclosures increase, according to a forecast by Freddie Mac.

Sales of new and previously owned homes probably will total 6.28 million, down 7.1 percent from last year, according to the world’s second-largest mortgage buyer. It would be the lowest since 6.20 million homes were sold in 2001. Residential lending will drop to $2.75 trillion, the lowest since 2002, the McLean, Virginia-based company said in today’s forecast.

And for those looking to buy a home:

Buyers are finding it more difficult to finance purchases because of higher mortgage rates and stricter lending standards, Freddie Mac said. The average U.S. rate for a 30-year fixed rate home loan probably will be 6.7 percent this quarter, according to the forecast. That’s the highest level so far this year, and it’s half a percentage point above the 6.2 percent average in the first three months of the year.

Just more than one in five homeowners (21 percent) have a home equity loan, according to a poll earlier this month from Experian (the credit report company) and Gallup. More than one-third (36 percent) say they got the loan to pay for home improvements. Another 17 percent said they are using the money to consolidate debt or pay down credit cards.

Some financial advisers warn against drawing down your equity, sometime otherwise known as a nest egg. So what say you about the wisdom of tapping your equity for granite counter tops or paying down high-interest credit cards?