Aug. 22 (Bloomberg) -- U.S. auto sales this year may fall to their lowest level since 1998 as housing starts keep declining and consumers' debt mushrooms, a market forecasting firm said.

The drop from 2006 may be 350,000 units, or about 2 percent, to 16.2 million, CSM Worldwide Inc. said in a statement today. Demand may not recover until 2008's fourth quarter, Northville, Michigan-based CSM said.

A decline in industry sales may make a turnaround for U.S. automakers more difficult. General Motors Corp., Ford Motor Co. and Chrysler LLC are cutting production while they continue to lose market share to Asian automakers, led by Toyota Motor Corp.

Housing starts, a key indicator of truck sales, plunged 26 percent in 2007's first half, CSM said. ``Weak'' existing-home sales are damping consumer spending, ``leaving less money available for vehicle purchases,'' CSM economist Charles Chesbrough said in the statement.

Through July, U.S. industrywide auto sales fell 3.2 percent to 9.55 million vehicles, including an 8.6 percent combined drop for GM, Ford and Chrysler, according to Woodcliff Lake, New Jersey-based Autodata Corp.

This month, GM and Ford lowered their forecasts for 2007 industry sales by as much as 1.8 percent. Ford cut its estimate to a range of 16.5 million to 16.8 million, from 16.8 million. GM's was lowered to a range of 16.5 million to 16.6 million, from 16.6 million to 16.7 million.

The GM and Ford estimates include medium- and heavy-duty trucks. U.S. deliveries of such trucks totaled 544,581 in 2006, according to Southfield, Michigan-based Ward's AutoInfoBank.

Toyota in August said it expects the U.S. industry to sell about 16.3 million cars and light trucks this year, a decline of 2 percent from 2006. The Toyota City, Japan-based automaker may pass Ford this year as second in U.S. sales.

CSM said 2007 North American car and light-truck production may drop by 200,000 to 15.1 million. GM and Ford output probably will fall at least 6.1 percent, while Chrysler, Toyota, Honda Motor Co. and Nissan Motor Co. may have increases, the firm said.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

Last Updated: August 22, 2007 17:44 EDT