Construction of single-family homes nationwide dropped to its slowest pace in 17 years. The Commerce Department reported last Thursday that the annual rate for the starts on single-family homes last month was 647,000 units. There was a dropped of 5.3 percent from the previous month. This is the slowest pace for singe-family homes starts activity since January 1991, another period of housing depression.

The drop in single-family construction was in contrast to a 42.5 percent increase in apartment building. The increase was mainly credited to a change in New York City building codes which cause builders to start building before the new regulation took effect on July 1.

The big surge in apartments in New York caused made total construction increase by 9.1 percent to a seasonally adjusted annual rate of 1.066 million units but still below last year’s level by 26.8 percent. Economists said they expect that figure will drop further in the coming months given all the problems facing housing at the moment.

The housing industry, which has been struggling to sell inventory of unsold new and existing homes, has been in a slump for more than two years. The glut is even getting bigger as levels of foreclosures are getting higher putting more houses on the market.

Buyers are still reluctant to purchase a home, being anxious that the value of homes will still continue to fall while others who are willing to buy are having trouble with the lenders’ stricter standard to qualify for a loan.

The prolonged housing slump continues to be the major cause of the country’s economic woes. Builders sentiment fell to a new all-time low in July as demand for new homes weakened further as the NAHB reported this week.

“Job-market losses, deepening problems in the finance area and sinking home values, aggravated by the wave of foreclosures, are all contributing factors that are keeping potential buyers on the sidelines,” David Seiders, chief economist for the home builders, said Thursday.

All the housing and financial market turmoil has raised fears that the country could be pushed into a recession, a development that would prolong the already severe housing correction.

The report on housing construction showed that applications for building permits, considered a good sign of future activity, rose by 11.6 percent to a seasonally adjusted annual rate of 1.091 million units. This increase was also skewed by a big rise in applications in New York, however.

Housing construction soared by 102.6 percent in the Northeast, reflecting the New York City surge, but fell by 12.8 percent in the Midwest, 9.4 percent in the West and 1.4 percent in the South.