Nationwide housing starts rose 2% in March, hitting an annual rate of 926,000 units from an upwardly revised reading the month before, according to the U.S. Commerce Department figures released on Thursday.

The increase is less than many analysts were expecting, with some hoping to see it move past the 1 million unit mark.

Single-family housing production, which represents around two-thirds of the market, rose 4.4% to an annual rate of 618,000 in March, while multifamily starts dropped 2.5% to 308,000 units.

Led by a drop in the volatile multifamily sector, the total number of building permits issued declined 5.7% in March to a rate of 1.039 million, a six-month low.

Multifamily permits fell 15.9% to a rate of 403,000 while single-family permits rose 2.1% to 636,000.

“The housing market remains lackluster with modest sales activity stunting robust building activity," says Lindsey Piegza, chief economist at Sterne Agee. “Despite modest improvement at the end of the quarter, starts remain below the 1 million unit threshold.

"In yesterday's [Federal Reserve] Beige Book, industry contacts reported activity was improving in most areas with heightened optimism of a larger rebound in both sales and starts this spring. This morning's report, however, does not reinforce such confidence.”

Regionally, combined single- and multifamily starts increased in the Northeast and Midwest, with respective gains of 114.9% and 31.3%. Housing production dropped 3.5% in the South and 19.3% in the West.

The Northeast registered a permit gain of 39.8%, while the Midwest, South and West posted respective losses of 4.4%, 14.2% and 4.3%.

“Builders are being careful not to add inventory beyond expected demand, especially as they struggle with increasing costs for lots, labor and materials,” said National Association of Homebuilders Chief Economist David Crowe. “However, pent-up demand, low mortgage interest rates and a growing economy should keep the housing industry moving forward throughout the rest of the year.”