The U.S. housing market continued to struggle in April as construction of new homes plummeted, the Commerce Department said Tuesday.

Homebuilders started 10.6 per cent fewer projects, with the numbers dragged down by a major drop in apartment building.

The seasonally adjusted rate fell to 523,000 homes per year, or less than half the 1.2 million homes per year that economists consider a sign of a healthy market.

The new home market continues to be weakened by millions of foreclosures of existing homes. Those are forcing the prices of previously occupied homes down.

The average price of a new home was about 34 per cent higher in March than a pre-owned one. That was more than twice the markup in a healthy market.

In some cities, prices are half of what they were before the housing market collapsed in 2006 and 2007. Many potential buyers who could qualify for loans are worried that prices will fall further. Others are hesitant to put their own homes on the market when prices are dropping.

Apartment construction falls 28%

Still, the April decline was largely because apartment and condominium construction plunged more than 28 per cent. Single-family home construction, which makes up roughly 80 per cent of the market, fell about five per cent.

Building permits, a gauge of future construction, fell by four per cent.

The housing market is weighing on the overall economic recovery. Each new home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to a builders' group.

In past modern-day recessions, housing accounted for 15 to 20 per cent of overall economic growth. In the first post-recession year, between 2009 and 2010, housing contributed just four per cent to the economy.

On Monday, the National Association of Home Builders said its survey of homebuilder sentiment was unchanged at 16. That's the same level it has been for six of the past seven months.

Any reading below 50 indicates negative sentiment about the market. The index hasn't been above that level since April 2006.

And when asked about where they see sales of single-family home heading over the next six months, the builders surveyed offered their most pessimistic outlook since September.

With files from The Associated Press