U.S. construction of new homes fell by 6.2 percent in August to a seasonally adjusted annual rate of 895,000 units, the slowest pace since January 1991, the Commerce Department reported Wednesday.
The decline was much bigger than the 1.6 percent drop analysts had been expecting for last month and showed weakness in all the country except the West.
New home construction dropped by 14.5 percent in the Northeast and 13.6 percent in the Midwest. The South saw construction fall by 7.4 percent.
In the West, however, construction rose by 10.8 percent last month.
Permits for future groundbreaking, an indicator of builder confidence, decreased by 8.9 percent in August to an annual rate of 854,000 units. That was 36.4 percent below the year ago level.
The larger-than-expected drop in new home construction last month indicated that the country remained in the grip of a severe housing downturn.
The once-sizzling U.S. housing market has slid into the worst slump in two decades. The severe housing downturn and a persisting credit crunch have been a major drag on the overall economy.