New US residential building slowed sharply in March after a surprise surge the month before, dimming hopes that the real estate slump may be nearing a bottom.

Housing starts fell for the eight time in nine months, dropping by 10.8 per cent to an adjusted annual rate of construction of 510,000, commerce department figures showed on Thursday. The decline was worse than analysts expected and was due to a big drop in construction of multi-family homes. Single-family starts were unchanged in the month.