WASHINGTON — Construction of new homes fell in May as the nation's homebuilders continued to struggle with a steep housing slump that has been exacerbated by rising problems with mortgage defaults.

The Commerce Department reported yesterday that construction of new homes and apartments dropped by 2.1 percent last month, the poorest performance since a huge 13.9 percent plunge in January.

The May decline was in line with expectations. The decline, which followed small gains in April and March, left construction 24.2 percent below the level of a year ago.

Construction of single-family homes was down 3.4 percent last month while construction of apartments rose by 3.1 percent.

The problems in housing reflect the end of a prolonged boom period in which sales of both new and existing homes set records for five consecutive years. When the boom ended in 2006, builders were left scrambling to deal with record levels of unsold homes.

The inventory glut has worsened in recent months as buyers who stretched to purchase homes during the boom years are now going into default at record levels, dumping more homes back on the market.

The latest survey saw builder sentiment in June fall to the lowest level in 16 years, since the severe housing downturn in 1991. Builders have been worried about the glut of unsold homes on the market, the rising defaults and now rising mortgage rates as central banks around the world have been raising interest rates to guard against inflation.

"It is clear that the crisis in the subprime sector has prompted tighter lending standards in much of the mortgage market and interest rates on prime-quality home mortgages have moved up considerably during the past month," said David Seiders, chief economist with the home builders.

Mortgage company Freddie Mac reported that 30-year mortgages jumped to 6.74 percent last week, the highest level in 11 months.