WASHINGTON (Reuters) — The pace of housing construction slowed in February as permits, starts and completions all fell, the government said Thursday in a report pointing to moderation after a five-year rally in the housing market.

The Commerce Department said February housing starts dropped 7.9% to a 2.12 million annual pace, still faster than expected, from an upwardly revised 2.303 million unit rate in January.

Economists had expected housing starts to slow to a 2.0 million unit pace in February.

Construction of single-family homes eased 2.3% to a 1.8 million unit pace, while multifamily construction plunged 30.4% to a 320,000 unit rate in February, the department said.

Starts fell 23.5% in the U.S. Northeast, biggest drop since May 2001. Construction declined 11.2% in the South and 10.4% in the Midwest, but rose 7.9% in the West.

Permits for future groundbreaking, an indicator of builder confidence, fell 3.2% to a 2.145 million unit pace from January's revised 2.216 million unit pace. Economists had expected permits to ease more, to a 2.110 million unit pace in February.

With rising mortgage rates, the U.S. housing market has begun to cool after a long run that shattered sales and construction records, and sent prices soaring more than 55% on average across the country. Long-term fixed mortgage rates climbed in February, according to mortgage finance company Freddie Mac. The average 30-year mortgage was at 6.42% last week.

Economists expect the housing sector to continue to ease this year, but still see 2006 as the third best year for the market on record.