New home starts on private residences fell 8.5% from December to January, the U.S. Census Bureau and the Department of Housing and Urban Development reported Wednesday.

Yet, analysts with Capital Economics, while noting the slowdown, say the January slowing in housing starts "isn’t as bad as the headline numbers suggest." 

"And with housing starts still significantly below normal levels, there is plenty of scope for strong gains later this year," analysts said.

Starts in January came in at an annual rate of 890,000 units, which is 8.5% below the December estimate of 973,000 starts. Still, that figure is 23.6% above the January 2012 rate of 720,000 units.

Single-family housing starts alone reach a rate of 613,000 last month, which his up 0.8% from 608,000 in December. Buildings with five or more units experienced more than 260,000 starts last month.

Building permits, similarly, grew with 925,000 permits filed in January, up 1.8% from December and 35.2% above the year earlier rate of 909,000 filings. 

Single-family authorizations in January totaled 584,000, up 1.9% above the revised December figure of 573,000. Authorizations of units in buildings with five units or more were at a rate of 311,000 in January.

Authorizations for new single-family homes rose 1.9% to 584,000 in January, up from 573,000 a month earlier.

The nation saw 724,000 housing completions in January. That figure is up 6% from 683,000 completions reported in December, and up 33.6% the January 2012 rate of 542,000 housing completions.

Single-family housing completions in January were up 7% at a rate of 565,000, compared to 528,000 from a month earlier. Additionally, the January rate for units in buildings with five units or more totaled 152,000.

Analysts at Econoday noted that housing starts showed some winter volatility in January by declining and showing possible linger effects from Hurricane Sandy. 

The decrease in starts was led "by a monthly 24.1 percent drop in the multifamily component after a 34.7 percent spike in December."

"While weather adds to volatility in starts during winter (an outdoor activity), permits (an indoor activity) indicate that homebuilders still have some modest optimism and plan to add to supply," the research firm explained.