Housing starts fell more than expected in June to their lowest level in eight months, a government report showed on Tuesday, supplying further evidence the economy was losing momentum during the second quarter.

The Commerce Department said housing starts dropped 5.0 percent to a seasonally adjusted annual rate of 549,000 units, the lowest level since October. It was the second straight month of decline in groundbreaking activity and was well below market expectations for a 580,000-unit rate.

May's housing starts were revised down to show a 14.9 percent decline, which was previously reported as a 10.0 percent drop. Compared to June last year, starts were down 5.8 percent, the biggest decline since November.

The only positive sign in the report was an unexpected 2.1 percent rise in applications for building permits to a 586,000-unit pace in June. That followed a 5.9 percent drop in May and compared to analysts' expectations for a slip to 570,000 units.

(Reporting by Lucia Mutikani, Editing by Chizu Nomiyama)