The U.S. Commerce Department released the housing market data on Wednesday. Housing starts in the U.S. declined 2.5% to 1.149 million annualized rate in December from a 1.179 million pace in November, missing expectations for an increase to 1.200 million.
November's figure was revised up from 1.173 million units.
The fall was driven by declines in starts of single-family and multifamily homes.
Housing market benefits from the strengthening of the labour market. But there is a shortage of houses available for sale.
Building permits in the U.S. fell 3.9% to 1.232 million annualized rate in December from a 1.282 million pace in November, beating expectations for a 1,200 pace.
Starts of single-family homes decreased 3.3% in December. Building permits for single-family homes were up 1.8%.
Starts of multifamily buildings fell 1.0% in December. Permits for multi-family housing dropped 11.4%.