New U.S. home construction fell less than expected in March as a retreat in mortgage rates helped to jolt homebuyer demand, but the housing market remains depressed.

Housing starts slid 0.8% last month to an annual rate of 1.42 million units, according to new Commerce Department data released on Tuesday. That is below Refinitiv economists' forecast for a pace of 1.40 million units.

In a sign the deep freeze that has paralyzed the housing market for months is not over yet, applications to build – which measures future construction – tumbled 8.8% to an annualized rate of 1.41 million units. 

"While the start of spring typically brings new life to the housing market, the new home construction market has yet to see new growth," said Nicole Bachaud, Zillow senior economist. "Builder confidence overall has been rising every month in 2023, but confidence that prospective buyers will return is still low, possibly a cause of lower home construction activity."

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