U.S. home construction unexpectedly fell 1.1 percent in February from a three-year high even with the help of warmer-than-normal weather in the month, but new building permits jumped to their highest level since October 2008.

Construction of homes and apartments last month slipped 1.1 percent to a seasonally adjusted annual rate of 698,000 units from January's upwardly revised 706,000-unit pace, the Commerce Department said Tuesday. Economists polled by Thomson Reuters had forecast February housing starts little changed at a 700,000-unit rate.

The report shows although today brings the first day of spring, the housing market is still in the doldrums of winter, said Mitchell Hochberg, principal of Madden Real Estate Ventures, a real estate developer and adviser in New York.  People are afraid to take the leap.  Employment and consumer confidence must rise and shadow inventory still has to work its way through the system.

Construction of single-family houses fell 9.9 percent, the biggest drop in a year, to a 457,000-unit rate. However, work on multi-family homes that include townhouses and apartment buildings advanced 21 percent, largely offsetting the decline in single-family starts. Housing starts in the South rose to their highest level in nearly 3 1/2 years.

Compared with the same month a year earlier, new-home construction in February was up 34.7 percent from the February 2011 rate of 518,000 units.

Building permits, a proxy for future construction, surged 5.1 percent to a 717,000-unit pace in February, blowing past economists' estimate of a 690,000-unit pace advance from January's 682,000-unit pace.

Newly issued building permits for single-family homes jumped 4.9 percent to a 472,000-unit pace -- the highest since April 2010. Meanwhile, permits for multi-family homes increased 5.6 percent to a 245,000-unit rate.

Sentiment among home builders held steady in March at the highest level in nearly five years, a survey showed Monday. Expectations for sales over the next six months reached the highest level since June 2007.