New US housing construction slumped in May to the lowest level this year, the government said Wednesday, renewing concerns about a sector that was at the centre of the financial crisis.

In another indication of the troubles bedeviling the sector, the government said it had ordered embattled mortgage giants Fannie Mae and Freddie Mac to delist from the stock market, ending an arrangement that underpinned the housing market for 40 years.

The number of new housing construction projects slumped a hefty 10 per cent to 593,000 in May, the lowest level since October 2009, from a revised April estimate of 659,000, the Commerce Department said in a report.

New construction permits — an indicator of future activity — fell 5.9 per cent last month to a one-year low of 574,000 from a revised April rate of 610,000, the department said. Most economists had predicted 631,000 permits were issued.

The report suggested that the expiration of the government’s home-buyer tax incentives on April 30 triggered a deep pullback in housing starts as well as home sales, said analyst Aneta Markowska at Societe Generale.

The pullback in housing starts was heavily concentrated in the southern part of the country, while the losses were concentrated in construction of single-family homes, a key industry component, she said.

The plunge underlined the fact that a sustained housing rebound has yet to get underway, said Nigel Gault, chief US economist at IHS Global Insight.

The improvement in home starts through April was driven by an extended homebuyers’ tax-credit program, including 8,000 dollars for first-time buyers.

“Now the credit is gone, it’s time for the payback,” Gault said. “Interest rates and house prices are both low, but credit remains tight and there’s still an over-supply of homes on the market.”

Easing unemployment from near double-digit levels could help improve housing activity over the second half of the year but the second successive monthly decline in single-family housing permits in May indicated that “the payback has further to run first,” he said.

“The next few months will see activity remaining at a very low level,” warned Ian Shepherdson, chief US economist for High Frequency Economics.

“Starts will likely fall a bit further in June. We expect activity to begin reviving, gradually, in the fall,” he said.

The housing sector was at the epicenter of a financial crisis stemming from a mortgage meltdown that sent the economy into recession in December 2007.

“The housing market excesses brought the economy to the brink and it was hoped this sector would help get us out of the mess we are in. That does not look like it is going to happen,” said Joel Naroff, president of Naroff Economic Advisors.

Reflecting the concerns, the Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac to “delist their common and preferred stock from the New York Stock Exchange” after their stocks faced difficulties in meeting listing requirements.

The two government-sponsored enterprises provide financing worth more than 5.9 trillion dollars to the US housing sector, accounting for almost three quarters of the mortgage market.

But the two behemoths were badly battered by the subprime mortgage crisis, which called into question their often-troubled status straddling government and the open market, and were rescued in a multibillion-dollar federal bailout.