WASHINGTON, Jan. 17 (Xinhua) -- U.S. construction of new homes plunged 14.2 percent in December to an adjusted annual rate of 1.006 million units, the weakest level since May 1991, the Commerce Department reported Thursday.

    The December figure for housing starts was far smaller than the1.150 million units expected by analysts and was 38.2 percent below the year-ago level.

    Last month, single-family housing starts fell 2.9 percent to an annual rate of 794,000 units. Multi-family housing starts plummeted an even bigger 41.1 percent to an annual rate of 196,000units.

    For all of 2007, construction of new homes dropped by 24.8 percent from 2006, marking the steepest decline since 1980. An estimated 1.354 million units were started last year.

    Permits for future groundbreaking, an indicator of builder confidence, decreased by 8.1 percent in December to an annual rate of 1.068 million units, the lowest point since March 1993, compared to the 1.140 million units analysts had been forecasting.

    Building permits dropped 25.2 percent to an annual rate of 1.376 million for all of last year, registering the sharpest decline since 1980.

    The once-sizzling U.S. housing market has cooled off significantly since 2006 and slid into the worst slump two decades.

    The slowing in residential construction, which subtracted about one percentage point from the growth rate of real gross domestic product in the third quarter of 2007, likely curtailed growth even more in the fourth quarter, and it may continue to be a drag on growth for a good part of this year as well, Federal Reserve Chairman Ben Bernanke said Thursday in his testimony to the House Budget Committee.