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US new-home construction fell in March at the start of the key selling season led by a drop in the Midwest.

Housing starts fell by a steeper than expected 6.8 per cent in March to an annualised pace of 1.21m units from the previous month, when they climbed 5 per cent. That compared with economists estimates for a 3 per cent drop.

Single-family homebuilding fell 35 per cent in the Midwest and 5.5 per cent in the West. The measure was flat in the Northeast and rose 3.2 per cent in the South.

Construction was boosted in February by unseasonably warm weather and the drop could reflect some giveback.

Meanwhile, permits to build new homes rose by 3.6 per cent to an annualised pace of 1.26m units, compared with February when they declined 6 per cent.

The housing market has been supported by strong job growth, improving wages and historically low mortgage rates. But a tight supply of new homes has constrained activity.

The data come a day after a survey showed that US homebuilder confidence had cooled in April.

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