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National housing starts dropped 5.8 percent in March with construction beginning on 654,000 new units, down from 694,000 in February.

Despite the monthly drop, however, this figure was 10.3 percent higher year-over-year, according to the Census Bureau. The change was largely due to lower multifamily construction, with developers beginning work on 178,000 units during March, down from 231,000 the month prior. At the same time, the apartment sector drove an increase in permitting, with multifamily permits driving a 4.5 percent increase despite a 3.5 percent drop in single-family permits during March.

"While combined U.S. housing starts lost some ground in March, this was almost entirely due to typical month-to-month volatility on the multifamily side," said David Crowe, chief economist of the National Association of Home Builders. "The fact is that single-family and multifamily starts and permits were all stronger in the first quarter of 2012 than they were in the fourth quarter of 2011, indicating that the market continues to slowly strengthen, albeit in fits and starts."

Regionally, the most significant changes in housing starts occurred in the South and Northeast, where the Census Bureau reported a 15.9 percent drop and 32.8 percent increase in new construction, respectively. The West and Midwest were little changed, with the Midwest posting a 1 percent gain.

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