WASHINGTON -- U.S. builders started work on more new housing than expected in February as construction of apartments, condominiums and townhouses increased, the U.S. Commerce Department said.

While housing starts -- led by a drop in work on single-family houses -- fell 0.4% last month to an annual rate of 1.647 million units, the number was higher than forecast. January starts had risen 4.8% to a 1.653 million-unit pace, the fastest since February 2000.

The annual pace of construction last month was close to the 1.593 million units built last year, the third best since 1987, suggesting that the real estate market will help buoy the U.S. economy. If starts continue at the current pace, construction will have begun on 1.503 million houses by the end of this year.

Analysts had expected housing starts to fall 3.1% in February to a 1.60 million-unit pace from a previously reported 1.651 million. The February decline was the first in four months.

Starts of single-family homes fell 2.4% in February to a 1.315 million-unit rate, the slowest since December. But February starts of multifamily homes, which include apartment buildings, condominiums and townhouses, rose 8.5% to a 332,000 annual rate.

Building permits, an indicator of future construction, fell 3.1% to 1.670 million units at an annual rate. Permits in January were at a 12-month high of 1.724 million.

By region, starts fell 2.7% in the Midwest to 363,000 units at an annual rate and fell 8.1% in the West to 376,000 units. Starts rose 21% in the Northeast to 150,000 units at an annual pace and rose 1.5% in the South to 758,000.

Home sales remain strong, other reports show. While sales of new homes fell 10.9% in January to 921,000 houses at an annual rate, that followed a record 1.03 million-unit pace in December, the Commerce Department said last month. If the January sales pace continues, 2001 would surpass the record 907,000 homes sold in 1999.

One reason is that buyers still feel secure enough to commit to a mortgage. While unemployment rose to a 16-month high of 4.2% in January and held at that rate last month, companies are still adding jobs. Incomes rose 0.5% in January after rising 0.4% a month earlier.

Construction companies added 16,000 workers in February, Labor Department data showed last week. That followed an increase of 158,000, the largest increase since February 1968 and the fifth largest increase on record, suggesting demand for new housing remains strong.