NEW YORK (CNNMoney.com) - Home building slowed in February, according to a government report Thursday, but the decline was not nearly as much as expected.

The Census Department said housing starts, which is when digging for a foundation begins, slowed by 7.8 percent to an annual rate of 2.12 million in February, down from January's huge 2.3 million revised rate.

1. 2. 3. 4.

But economists were looking for an even bigger decline to 2.03 million new starts, according to Briefing.com.

The number of building permits, which are needed before excavation begins and are seen as a sign of builder confidence, fell to a 2.15 million annual rate in February, down from 2.22 million in January.

Economists had called for 2.11 million permits, according to Briefing.com's survey.

"This big decline is coming off an extraordinary number in January. It was natural, " said Jim Glassman, an economist at J.P. Morgan. "This bodes pretty well for housing activity, it's a very good level. Although it doesn't mean housing activity isn't slowing."

A drop was expected in February simply because January's numbers were so high, a surge attributed to builders taking advantage of unusually warm weather.

The report said housing starts for February are 4.8 percent lower than this time last year, but building permits are 2.5 percent higher.

Glassman said housing starts are the more closely watch figure, and the year-over-year decline, coupled with low inflation numbers that should support the housing by keeping interest rates from rising much further, suggest the real estate is coming in for a soft landing rather than a crash.

__________________

Homebuilders' confidence takes a hit. Click here