The Commerce Department reported Wednesday that construction of new homes and apartments fell to its lowest level in 17 years last month as building rate surprisingly dropped 6.2% to a seasonally adjusted annual rate of 895,000 units while building permits fall almost 9%.

This is the slowest since January 1991, a period of housing correction. The decline is larger than analysts’ expectation of 1.6% drop. The drop is evident in all the regions except the West. The sharpest drop in building activity was in the Northeast.

Construction dropped by 14.5% in the Northeast and declined 13.6% in the Midwest and 7.4% in the South.

The weakening economy resulted to 33.1% decline in construction activity compared to last year’s data.

Analysts believe that construction will continue falling for many more months as builders struggle to reduce the backlog of unsold new homes in a market that continues to slump.

Building permits, a measure of future activity, dropped 8.9% in August to an annual rate of 854,000 units.

For August, the 6.2% drop in housing construction reflected a 1.9% decline in single-family construction, which fell to an annual rate of 630,000 units. Construction of multifamily units fell by 15.1% to an annual rate of 265,000 units.

The housing slump has slowed down overall economic activity and forced country closer to an economic recession. Thousands of construction jobs have been lost, contributing to an economic downturn that has pushed the overall unemployment rate to a five-year high of 6.1% in August.