U.S. housing starts fell for a third straight month in February, but a rebound in building permits offered some hope for the housing market as it struggles to emerge from a soft patch.
The Commerce Department said on Tuesday groundbreaking slipped 0.2 percent to a seasonally adjusted annual rate of 907,000 units. That followed January's revised 11.2 percent decline and suggested underlying weakness in housing activity apart from the drag of cold weather. January starts were previously reported to have tumbled 16 percent.
Economists polled by Reuters had expected starts to rise to a 910,000-unit rate last month.
Groundbreaking plunged 37.5 percent in the Northeast last month, indicating unusually cold temperatures continued to dampen housing activity. That was the biggest drop in more than two years and pushed starts in the Northeast to their lowest level since November 2012.
(Read more: Why baby boomers are turning to reverse mortgages)
Starts also fell 5.5 percent in the West, which was unaffected by severe weather. The weather explanation for the weak housing data is challenged by a 7.3 percent rise in starts in the South and a 34.5 percent jump in the Midwest.
A worker uses a saw on a roof while building a new home at the Toll Brothers Inc. Baker Ranch community development in Lake Forest, California, Feb. 11, 2014.Patrick T. Fallon | Bloomberg | Getty Images
Price pressures muted
Housing started losing momentum last summer, with sales falling after a run-up in mortgage rates.
While mortgage rates have dropped a bit and the weather is starting to warm up, housing will probably take a while to regain strength as high prices and a shortage of homes on the market keep out potential buyers.
A report on Monday showed homebuilders were a bit optimistic in March but downbeat about sales over the next six months. Builders were also worried about shortages of lots and skilled labor, and rising prices for materials.
Groundbreaking for single-family homes, the largest segment of the market, rose 0.3 percent to a 583,000-unit pace last month. Starts for the volatile multi-family homes segment fell 1.2 percent to a 324,000-unit rate.
(Read more: Wall Street sharplydivided on 2015: CNBC Fed Survey)
Permits to build homes increased 7.7 percent in February to a 1.02 million-unit pace. Permits for single-family homes fell 1.8 percent. Multifamily sector permits surged 24.3 percent.
A separate report showed U.S. consumer prices rose marginally in February, but the lack of inflation pressures will probably not dissuade the Federal Reserve from dialing back its monetary stimulus.
The Labor Department said its Consumer Price Index nudged up 0.1 percent as a decline in gasoline prices offset an increase in the cost of food. The CPI had ticked up 0.1 percent in January and last month's gain was in line with economists' expectations.