The Department of Commerce said today housing permits dropped to their lowest levels in 10 years in April, but that home construction starts still beat expectations.

Builders managed to break ground on new dwellings at an annual rate of 1.53 million units, up 2.5% in April. Construction of single-family homes increased 2% to a 1.22-million-unit rate. Work on multifamily construction increased 6% to 303,000.

Last month’s upturn in construction activity isn’t likely to continue since housing permits - which signal future construction plans - fell 9% in April to a pace of 1.43 million units. The April figure represents the slowest annual pace since June 1997. What’s more, that 9% monthly drop was the sharpest in 17 years. Over the past year, the department says building permits have dropped 28% and construction starts have dropped 16%.

In other housing news, the National Association of Homebuilders reported yesterday its confidence index for homebuilders dropped to 30 for May. This month’s index, also recorded last September, is a 15-year low.

The monthly report takes into account current single-family home sales, sales for the next six months, as well as buyer traffic. The index had been as high as 78 in December 1998. A year ago in May, the index was 46.

Last week, the National Association of Realtors cut its estimates for new and existing home sale for this year and 2008. The trade group also said existing homes prices will fall more than it had previously forecast and that the median price for new homes will fall this year for the first time since 1991.