U.S. housing starts and permits for future home construction unexpectedly fell in June, further evidence of a sharp slowdown in economic activity in the second quarter.
The Commerce Department said on Wednesday housing starts dropped 9.9 percent to a seasonally adjusted annual rate of 836,000 units. That was the lowest level since August last year. May's starts were revised up to show a 928,000-unit pace instead of the previously reported 914,000 units.
Economists polled by Reuters had expected groundbreaking to rise to a 959,000-unit rate last month.
Permits to build homes fell 7.5 percent last month to a 911,000-unit pace. Economists had expected them to rise to a 1-million unit pace.
The report was the latest indication that economic growth probably braked sharply from the first quarter's 1.8 percent annual pace. The economy has been hit by tighter fiscal policy and slowing global demand.
The housing market has been providing a buffer against those headwinds.
The volatile multi-family sector accounted for the unexpected drop in groundbreaking and permits, a suggestion that the housing recovery remains intact.
Sentiment among single-family home builders hit a 7-1/2 year high in July, a report showed on Monday, amid optimism over current and future home sales. But many builders have been complaining about a shortage of labor and materials, which may have contributed to last month's surprise decline in activity.
Last month, groundbreaking for single-family homes, the largest segment of the market, slipped 0.8 percent to a 591,000-unit pace, the lowest since November 2012. Starts for multi-family homes declined 26.2 percent to a 245,000-unit rate.
Permits for multi-family homes fell 21.4 percent to a 287,000-unit rate. But permits for single-family homes rose 0.6 percent to a 624,000-unit pace, the highest since May 2008.
(Read more: Home builder confidence soars)