After reporting significant increases in new residential construction in the U.S. over the two previous months, the Commerce Department released a report on Wednesday showing housing starts pulled back by much more than expected in the month of August.

The Commerce Department said housing starts plummeted by 8.5 percent to an annual rate of 1.307 million in August after surging by 3.4 percent to a revised rate of 1.429 million in July.

The much bigger than expected pullback by housing starts reflected steep drops by both single-family and multi-family housing starts.

The report said plunged by 7.0 percent to an annual rate of 890,000, while multi-family starts saw an 11.7 nosedive to an annual rate of 417,000.

The Commerce Department also said building permits dove by 3.7 percent to an annual rate of 1.312 million in August after slumping by 2.2 percent to a revised rate of 1.362 million in July.

Building permits, an indicator of future housing demand, were expected to jump by 1.2 percent to an annual rate of 1.370 million from the 1.354 million originally reported for the previous month.

The unexpected decrease came as single-family permits tumbled by 2.2 percent to an annual rate of 856,000 and multi-family permits plunged by 6.4 percent to an annual rate of 456,000.

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