U.S. housing starts fell again in August, indicating that the worst housing slump in a generation will continue to weigh on the U.S. economy.

Starts of new homes declined 6.2% in August to a seasonally-adjusted annual rate of 895,000, the U.S. Commerce Department announced Wednesday. It was the lowest new home start rate in 17 years (pdf).

Economists surveyed by Bloomberg News had expected housing starts to total a 950,000 annualized rate in August.

Meanwhile, starts of single-family homes fell 1.9% to a 630,000 annualized rate.

Economist Glen Langan said the housing market remains "a terrible market if you're trying to sell a home, and still a risky market if you're thinking of buying a home."

"Conditions vary by region, but in general the U.S. housing market remains in a deep slump. Unless you absolutely have to or you find your 'dream house,' it makes sense to a wait a few months to see if the market stabilizes, mortgage availability factors being equal," Langan said. "In most regions of the U.S. home prices and sales are falling and that's why we're seeing a declining rate of new home starts by home builders."

Langan said home builders continue to cut back as the inventory of unsold new homes remains well above the industry's median. "The supply of new homes must be brought down from 10-12 month supplies in most regions of the U.S. to the typical 3-4 month supply. That's going to take a while so we're likely to see low home building totals for at least the next two to three quarters," Langan said. "Of course buyer hesitancy, which is understandable, is delaying the work-down in new home levels, as well."

Housing Sector Analysis: With the housing sector showing almost no signs of a recovery, the above means housing will continue to be a contracting force in the U.S. economy. The U.S. will need to register growth in other sectors to jump-start GDP growth -- no easy task, given sluggish business investment and a pull-back in consumer spending.