WASHINGTON- U.S. homebuilding fell more than expected in January as many parts of the country experienced freezing temperatures, but a surge in permits suggested a rebound in the coming months was likely amid a severe shortage of homes on the market.

Housing starts dropped 4.1% to a seasonally adjusted annual rate of 1.638 million units last month, the Commerce Department said on Thursday. Data for December was revised slightly up to a rate of 1.708 million units from the previously reported 1.702 million units. Economists polled by Reuters had forecast starts would fall to a rate of 1.700 million units.

Permits for future homebuilding in January rose 0.7% to a rate of 1.899 million units, the highest since 2006.

Temperatures were below average from the Midwest and Tennessee Valley to the Northeast in January, according to the National Centers for Environmental Information.

Single-family housing starts, which account for the biggest share of homebuilding, dropped 5.6% to a rate of 1.116 million units last month. Single-family homebuilding fell in the Northeast, Midwest and South, but rose in the West.

Single-family building permits surged 6.8% to a rate of 1.205 million units. The supply of previously owned homes on the market is at record lows, which should keep builders busy.

But builders are facing challenges from soaring prices for inputs. Prices for softwood lumber, which is used for framing, shot up 25.4% in January after a 21.3% rise in December, the Labor Department's producer price report showed this week. The United States last November nearly doubled the duties on imported Canadian softwood lumber after a review of its anti-dumping and countervailing duty orders.

The National Association of Homebuilders said on Wednesday that building material production bottlenecks were raising construction costs and delaying projects. The NAHB noted that "many builders are waiting months to receive cabinets, garage doors, countertops and appliances."

Rising mortgage rates could also slow demand for housing, especially among first-time home buyers. The 30-year fixed mortgage rate jumped above 4% last week for the first time since 2019, according to the Mortgage Bankers Association. Mortgage rates are rising as the Federal Reserve is expected to start hiking interest rates next month to tame high inflation.

(Reporting by Lucia Mutikani Editing by Paul Simao) ((Lucia.Mutikani@thomsonreuters.com))