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US Feb housing starts see larger-than-expected

By Jonathan Nicholson

WASHINGTON, March 16 (Reuters) - U.S. homebuilders broke ground on homes at a slower pace in February, the Commerce Department said in a report on Tuesday that showed the housing market may be losing steam.

The department said starts of new homes fell 4.0 percent to a seasonally adjusted annual rate of 1.855 million in February, well below the 1.930 million pace of starts that Wall Street analysts had projected. January starts were revised upward to a 1.932 million rate from the initially reported 1.903 million pace.

The drop in February starts came despite low mortgage interest rates. According to mortgage finance company Freddie Mac, the average rate on the popular 30-year mortgage was 5.64 percent in February, the lowest since July 2003.

Bad weather in February may also have played a part in the month's decline in starts. But the drop in starts was limited to the West and South regions of the country, while completions of houses increased in the month.

Housing permits, seen as an indicator of builders' confidence, also dipped in February, falling 1.5 percent to a 1.903 million annual rate. The figure was in line with Wall Street projections.

While February's data was weaker-than-expected, the level was still up 13.1 percent compared to February 2003.

"The impact is going to be limited because the underlying strength in the housing sector has been so strong that one report doesn't make a trend," said Tim Mazanec, senior currency strategist with Investors Bank & Trust in Boston.

The report is also expected to have little impact on Federal Reserve policymakers, who are gathering on Tuesday to discuss interest rate policy. Most Wall Street analysts expect the central bank to leave rates at their post-1958 low of 1.00 percent until they see evidence of jobs growth.

By region, starts were up in the Northeast and Midwest regions but were down in the larger South and West markets.

Starts rose 25.3 percent to a 188,000 pace in the Northeast and 7.1 percent in the Midwest to a 349,000 rate. The Northeast pace was the fastest since February 1988. In the largest new home market, the South, starts fell 10.6 percent to a 839,000 annual rate, while the West saw starts slide 7.5 percent to a 479,000 rate.

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