The pace of U.S. home construction declined more than forecast in January, indicating an unusually harsh winter probably played a role in slowing projects.

Housing starts fell 16 percent to an 888,000 annualized rate following December’s revised 1.05 million, the Commerce Department reported today in Washington. The decrease was the biggest since February 2011. The median estimate of 84 economists surveyed by Bloomberg called for 950,000. Permits for future projects showed a smaller drop, a sign activity may stabilize as the weather improves.

The coldest January in two decades probably limited groundbreaking for homebuilders as construction dropped to a record low in the Midwest. At the same time, a strengthening labor market in 2014 may help the housing industry pick up from a slow start to the year even as borrowing costs rise.

“A lot of it is weather, obviously,” Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, said before the report. Still, “the story is better job and income growth and you have all this pent-up demand. You’re seeing household formation start to improve and inventories have been pared down.”

Estimates (NHSPSTOT) for starts in the Bloomberg survey ranged from 880,000 to 1.04 million. The December reading was revised up from a previously estimated 999,000 pace.