U.S. housing construction plunged to the lowest level in more than six years in October as the country's once-booming housing market slowed further.

Construction of new single-family homes and apartments dropped to an annual rate of 1.486 million units last month, down a sharp 14.6 per cent from the September level, the Commerce Department reported Friday.

The decline, bigger than expected, was the largest percentage decline in 19 months and pushed total activity down to the lowest level since July 2000.

Applications for new building permits, seen as a good sign of future plans, fell for an eighth consecutive month, declining 6.3 per cent to an annual rate of 1.535 million units.

Bye-bye boom

The sharp slowdown in housing this year stands in stark contrast to the past five years, when the lowest mortgage rates in four decades had powered a housing boom that pushed sales of both new and existing homes to five consecutive records.

The housing weakness trimmed a full percentage point off economic growth in the July-September quarter, when the economy expanded at a tepid 1.6 per cent rate.

Housing is expected to continue acting as a drag over the next year, but analysts believe the adverse effects of falling sales and construction cutbacks will not be enough to pull the country into a recession.

There were signs that the steep plunge in housing was beginning to level off.

Builder sentiment budges

The monthly survey of builder sentiment edged up slightly in early November following another small increase in October. It marked the first back-to-back improvement in builder sentiment since June 2005.

The level of building activity in October was 27.4 per cent below activity in October 2005, the biggest year-over-year decline since March 1991.

Construction of single-family homes fell by 15.9 per cent in October from the seasonally adjusted September level, dropping to an annual rate of 1.177 million units. Construction of multi-family units dropped by 9.1 per cent to an annual rate of 309,000 units.

The drop in construction was led by a 26.4 per cent decline in the South. Construction fell by 11.7 per cent in the Midwest and was down 2.1 per cent in the West.

The only region showing strength was the Northeast, where construction jumped by 31 per cent.