Housing starts fall 8.5% in January

• Pace of new-home starts is third highest since 2008
• Home builder confidence sagging despite recent housing market gains
• Level of new-home starts is still 50%25 below what is considered healthy market

Housing starts fell 8.5% in January after surging 15.7% the month before, the Commerce Department said Wednesday.

The government's report suggests home builders began work at a slower pace in 2013 than expected though the level was still the third highest since 2008. And new-home starts are likely to pick up in coming months. The number of houses built in 2012 was the most in four years.

The number disappointed analysts who had been expecting January to add on to several months of evidence the housing market rebound is gaining momentum.

The Commerce report said new-home construction totaled a seasonally adjusted annual rate of 890,000 last month after jumping to an annual rate of 973,000 in December, the best month for new-home starts since June 2008.

The number of new permits for to build a home did show improvement. They totaled 925,000 at an annual rate last month, up 1.8% from December's 909,000, which had been the highest total for permits since mid-2008.

HOUSING:New home starts jumped in December

The pace of construction of single-family homes rose 0.8% in January, while apartment construction's pace, which is more volatile, dropped 24.1%.

However, home builders are struggling to keep the housing recovery's momentum going. The National Association of Home Builders said Tuesday that home builder confidence slipped this month after hitting a 6 1/2-year high last month.

The NAHB sentiment index dipped to 46 in February from 47 in January, the first monthly drop since last April. Readings below 50 suggest negative sentiment about housing, and the last time the index was 50 or higher was April 2006, when it was 51. It began trending higher in October 2011, when it was 17.

The U.S. housing market is slowly recovering after five years of markedly subpar performance that followed the collapse of the residential real estate bubble in 2007. Ultra-low borrowing rates and the Federal Reserve's aggressive bond-buying program aimed at stimulating job growth in the economy have helped the housing market to rebound.

Home prices have been rising in recent months, mostly because there are fewer homes for sale than there is demand. The supply of previously occupied homes for sale is at the lowest level in more than 10 years.

Another sign of an improving housing market: The pace of foreclosures, while still rising in some states, has slowed sharply nationwide. on a national basis. That means fewer low-priced foreclosed homes are being dumped on the market.

HOUSING:Home builder sentiment declines in January

Home builders started work on 780,000 new houses in 2012, up 28% from 2011's total. But that's still about 50% below the number consistent with a healthy housing market. homes.

Sales of new homes jumped nearly 20% last year to 367,000, the most since 2009. Still, many economists don't foresee a full housing recovery before 2015 at the earliest.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the home builders.

Contributing: USA TODAY's Beth Belton, The Associated Press