New housing construction in the U.S. dipped unexpectedly in the month of March, but an equally unexpected jump in building permits offers hope for the future of the beleaguered housing market. According to figures released Tuesday by the Commerce Department, new privately-owned housing starts came in at a seasonally adjusted annual rate of 654,000 in March, a 5.8 percent drop from February levels. Additionally, the February figures were revised down slightly from the 698,000 rate initially reported to 694,000. The March rate of new housing starts comes in well below the expectations of most economists, who had predicted a slight uptick to a rate of 700,000. However, new building permits, often viewed as an indicator of future housing starts, jumped significantly in March to a seasonally adjusted annual rate of 747,000. That marks a 4.5 percent increase over February levels, which were revised slightly to a rate of 715,000. Most economists had expected new permits to come in modestly lower than February levels at a rate of 713,000. With the unexpected increase, building permits rose to their highest level since September of 2008. Compared to March 2011 levels, housing starts posted a 10.3 percent increase, while permits were up by 30.1 percent. The monthly drop in housing starts can largely be traced to a decrease in multi-family starts, as single family housing starts dropped just 0.2 percent, while starts of buildings with five or more units were down 19.8 percent. New housing construction was down a dramatic 15.9 percent in the South, the nation's largest housing market. In the West and the Midwest, new housing starts showed little change, rising just 1 percent in the Midwest and holding level in the West. In the smallest housing market defined by the Commerce Department, the Northeast, overall housing starts were up 32.8 percent, despite a 10 percent drop in single-family housing starts.