WASHINGTON - March 17, 2011 - U.S. housing starts posted their biggest decline in 27 years in February, while building permits dropped to their lowest level on record, suggesting the beleaguered real estate sector has yet to rebound from its deepest slump in modern history.

Groundbreaking on new construction dropped 22.5% last month to an annual rate of 479,000 units, according to Commerce Department data released on Wednesday. This was just above a record low set in April 2009 and way below the estimates of economists, who had been looking for a smaller drop to 570,000.

January's figure was revised up to 618,000 units from 596,000. But that did not change the tenor of the report, which confirmed that the sector is failing to recover despite interest rates near record lows.

Building permits, a hint of future construction demand, fell to a record low of 517,000 units from a revised 563,000, and were down by about 20% from levels seen in February 2010.

One key impediment to the sector's recovery is a vast backlog of unsold inventory, while a shaky job market has made consumers reluctant to embark on any major new financial commitments. Making matters worse, a glut of foreclosures, stalled in recent months by revelations of improper loan documentation and financial institution fraud, is depressing the market.