U.S. housing starts unexpectedly fell in January likely as bad weather disrupted building projects in some parts of the country, in what could be a temporary setback for the housing market.

Groundbreaking fell 3.8 percent to a seasonally adjusted annual pace of 1.099 million units, the Commerce Department said on Wednesday. Part of the decline in starts could be attributed to the snowstorms, which blanketed the Northeast last month.

December's starts were revised down to a 1.143 million-unit rate from the previously reported 1.15 million-unit pace. Economists polled by Reuters had forecast housing starts rising to a 1.17 million-unit pace last month.

The report comes on the heels of a survey on Tuesday showing confidence among homebuilders fell in February amid concerns over "the high cost and lack of availability of lots and labor." Builders were less optimistic about current sales.

Still, the housing market fundamentals remain strong, with a tightening labor market starting to push up wage growth.

Though residential construction accounts for a small fraction of gross domestic product, the decline in starts at the beginning of the year suggests that an anticipated rebound in economic growth will be modest.

The economy grew at a 0.7 percent annual pace in the fourth quarter after consumer spending moderated and a strong dollar hurt exports. Gross domestic product growth was also restrained by efforts by businesses to sell inventory and cuts in capital goods spending by energy firms.

GDP growth estimates for the first quarter are currently around a 2 percent rate.

In January, single-family housing starts, the largest segment of the market, fell 3.9 percent to a 731,000-unit pace. Single-family starts tumbled 14.1 percent in Northeast and fell 3.8 percent in Midwest. Groundbreaking on single-family projects was unchanged in the South, where most home building takes place. Single-family starts in the West slipped 0.4 percent.

Housing starts for the volatile multi-family segment dropped 3.7 percent to a 368,000-unit pace.

Building permits dipped 0.2 percent to a 1.202 million-unit rate last month. Permits for the construction of single-family homes fell 1.6 percent last month. Multi-family building permits increased 2.1 percent.