U.S. homebuilding fell more than expected in February as construction of single-family homes dropped to more than a 1-1/2-year low, but the outlook for the housing market is improving amid declining mortgage rates.

Housing starts decreased 8.7 percent to a seasonally adjusted annual rate of 1.162 million units last month, the Commerce Department said on Tuesday. The percent decline was the largest in eight months, and bad weather could have contributed to the sharp drop in homebuilding last month.

Data for January and December were revised higher.

Building permits fell 1.6 percent to a rate of 1.296 million units in February. While that was the second straight monthly drop in permits, they are now outpacing starts, which suggests a pickup in homebuilding in the months ahead.

Economists polled by Reuters had forecast housing starts falling to a pace of 1.213 million units in February.

The housing market hit a soft patch last year, squeezed by higher mortgage rates, pricey lumber, and land and labor shortages, which led to tight inventories and more expensive homes. But borrowing costs have eased as the Federal Reserve signaled it was halting further interest rates increases this year amid growing headwinds to the economy.