U.S. home building projects started in November fell by 3.7 percent as the pace of single-family home construction was the slowest in more than 16 years, a government report Tuesday showed.
The Commerce Department said housing starts fell to an annual rate of 1.187 million units, slightly better than the 1.180 million unit pace Wall Street economists were expecting.
But single-family home starts, which account for the bulk of home building projects, fell for the eighth straight month, tumbling 5.4 percent to an annual pace of 829,000 units, the lowest since April 1991.
Economists said the housing slump will certainly weigh heavily on economic growth during the last three months of this year.
"The fourth quarter of GDP is going to have a substantial drag from the second leg down in construction, but the bright spot is that it's unlikely that we're going to see this rate of decline continue," said Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut.
Prices for U.S. government bonds fell slightly after release of the data.
Adding to grim housing picture, building permits fell 1.5 percent to a 1.152 million unit pace, the lowest since June 1993.
Housing starts plummeted 24.2 percent from a year ago and permits, which are a key gauge of future building activity, tumbled 24.6 percent.
Both the Midwest and Northeast regions saw a 20 percent decline in single-family housing starts from October.
"It's continuing in the same direction that it has been for the last 12 to 18 months," said Bob Moulton, president of the Americana Mortgage Group. "I think the trend will continue because it's a very slow moving commodity."