WASHINGTON (MarketWatch) — New construction of U.S. housing units plunged in February, erasing a sharp gain in January and coming close to an all-time-low level.

Starts fell 22.5% to a seasonally adjusted annual rate of 479,000, the Commerce Department said. This is just 0.4% above the record low of 477,000 units set in April 2009.

The decline in starts in February was the largest since March 1984.

January starts were revised higher to a 618,000 pace from the 596,000 previously reported. The 18.4% jump in January was due to an 87.4% surge in apartment starts, which analysts attributed to special factors.

As a result, economists were expecting a decline in February — but nothing close to the actual drop. Analysts polled by MarketWatch had forecasted starts to fall to a 570,000 rate. Read our economic calendar and forecasts.

U.S stock markets opened lower after the report, with shares of builders including Lennar LEN, +2.95% and PulteGroup PHM, +1.98% dropping around 2% each.

Paul Dales, senior U.S. economist at Capital Economics, said that there is simply no need for housing starts given the excess supply of existing homes that are more attractive to buyers.

With house prices falling again, home builders have little desire to boost construction, he noted.

A new constraint on starts are rising costs for building materials, Dales said in a research note.

The National Association of Home Builders reported on Tuesday that its measure of builder confidence edged up in March.

Details in the data

Starts of single-family homes fell 11.8% to a 375,000 rate, while starts of multifamily units dropped 46.1% to 104,000. Read the full government report.

In the past year, starts are down 20.8%. Starts of single-family homes are off 28.8%, while starts of apartments and condominium units have plunged 54.8%.

The number of homes under construction fell 1.2% in February to a record-low 424,000 annual rate, while the number of units completed rose 13.9% to an annual rate of 581,000.

Starts fell across all four regions of the country, with single-family housing starts hitting a record low in the Midwest.

Building permits fell 8.2% to a record-low seasonally adjusted annual rate of 517,000 in February. Building permits for single-family homes dropped 9.3% to a 382,000 rate. Many economists consider single-family permits to be the most important number in the government’s release.

Current-account gap

In a separate report, the Commerce Department said the U.S. current-account deficit, the widest measure of trade, narrowed to $113.3 billion in the fourth quarter, or 3.1% of gross domestic product, from $125.5 billion in the third quarter.

The narrower deficit was accounted for by a decrease in the deficit on goods and services.

The deficit is down sharply from the peak of 6.5% of GDP in the fourth quarter of 2005. But the deficit has been widening steadily after hitting a low of 2.4% of GDP in the second quarter of 2009.

In a separate report, the Labor Department said the producer price index rose 1.6% in February while core prices, excluding food and energy, rose 0.2%. Read about the biggest jump in food costs since 1974.