Residential starts decreased 14.8% last month to a 1.3 million annualized rate, after an upward revision to the prior month, government data showed Friday. Multifamily home construction plummeted by more than 35% after surging in the prior month, while single-family groundbreakings also slowed.

The headline figure — which was lower than all estimates in a Bloomberg survey of economists — was the slowest pace in five months.

"The monthly housing starts numbers are extremely noisy and prone to revisions, but the bigger picture is that single-family starts are trending higher, lagging the drop in mortgage rates towards the end of last year, while multi-family starts are trending lower, lagging the rollover in rent inflation," Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics, said in a note.

Building permits, a proxy for future construction, decreased to a 1.5 million rate. Permits for one-family homes edged higher after rising consistently throughout 2023, and multifamily authorizations fell 7.9%, the most since September.

The government's report showed housing starts fell in all four of the nation's regions, led by the Midwest and Northeast. The number of single-family homes completed plunged to the lowest level since May 2020.

The housing market's recovery has struggled to maintain momentum as mortgage rates are still elevated near 7%. However, the nation's builders have been gaining confidence in recent months on expectations that a further decline in borrowing costs will boost demand.

So far, builders have enjoyed limited competition from existing homes for sale. Homes available on the resale market are well below pre-pandemic levels as most owners remain reluctant to give up mortgages locked in at much cheaper rates.

At the same time, the inventory of new houses for sale remains elevated and suggests builders may be cautious about beginning new projects.

The National Association of Realtors will give a glimpse of the nation's resale market Feb. 22, when it releases existing-home sales figures for January.

A separate report Friday showed prices paid to US producers rose in January by more than forecast, highlighting the sticky nature of inflation.