WASHINGTON - January 20, 2010 - The housing market remains a significant risk to the economy, data Wednesday showed, as bad weather across much of the country hammered the construction industry.

Also on Wednesday, the government said buyers will face higher fees and tougher standards for home loans backed by the Federal Housing Administration, a popular source of loans for first-time buyers.

Unemployment is expected to remain high throughout the year, which will drive the foreclosure rate to new records.

“If we don't get some jobs, it's not going to make a difference,” said Rick Jenkins, owner of R.J. Builders in Terre Haute, Indiana.

Construction of new homes and apartments fell 4% in December to a seasonally adjusted annual rate of 557,000 from an upwardly revised 580,000 in November, the Commerce Department said. Applications for future projects, however, increased strongly as the industry ramps up for the spring selling season.

Meanwhile, inflation pressures at the wholesale level eased in December as a drop in energy prices offset a big jump in food costs.

The Labor Department said Wednesday that wholesale prices edged up 0.2% last month, much slower than the 1.8% surge in November. Energy prices, which had been up for two months, fell in December.

The price performance at the wholesale level combined with last week's benign reading on consumer prices supported the view that inflation is not a problem.

But on Wall Street, investors instead focused on disappointing earnings from IBM and Morgan Stanley and tighter lending rules in China. If the country's huge economy slows, it could hurt demand for U.S. exports. The Dow Jones industrial average was down 122 points from a 15-month high, its biggest drop in a month.