Construction of new homes fell to the lowest level in 17 years in March, the Commerce Department reported Wednesday, a much bigger decline than economists were predicting. Housing starts in March fell 11.9 percent from February, dropping 36.5 percent from the prior year.

“These figures confirm that the housing market is still groping for a bottom,” said Mike Larson, a real-estate analyst for research firm Weiss Research.

Building permits in March also declined 5.8 percent from February and fell 40.9 percent from one year ago, the Commerce report revealed. Building permits are a good indicator of future construction activity and in this case indicate that even more problems and job losses lie ahead for the troubled housing sector.

“It’s a dismal report,” said Richard DeKaser, chief economist at National City Corp in Cleveland.

The economic grind-down continues. For more on how the economy hasn’t yet seen the worst, read “Whew! Everyone Back in the Pool.”