The 0.2% drop in new home construction compared with a 6.1% increase in the previous quarter.
Overall, total construction output fell by 2.1% in the quarter, the Office for National Statistics said, worse than an initial estimate of a 1.8% contraction.
The UK housing market has been slowing over the past few months.
On Thursday, the latest survey from the Royal Institution of Chartered Surveyors (Rics) said that the number of new buyers approaching its estate agency members in England and Wales had fallen for the seventh month in a row.
However, a recent survey of the UK construction sector suggested that activity had picked up again in January.
And Howard Archer, an economist at IHS Global Insight, noted that while housebuilding had dipped in the final quarter of 2014, it was still up 18.7% from a year earlier.
"The outlook seems largely decent for the construction sector in 2015, although it will likely expand at a slower rate than in 2014," Mr Archer said.
"Meanwhile, prospects still look relatively bright overall for housebuilding, even if the growth rate is unlikely to regain the heady levels seen earlier in 2014."

Police Scotland said the recovery was made after an intelligence-led operation in the Guild Street area on Tuesday.
Jian Lin, 39, of no fixed abode, appeared at Aberdeen Sheriff Court on Wednesday on a drugs charge.
He made no plea and was remanded in custody.

Steven Preston went missing on 18 September 1992 from his home in Wirral.
New information suggests Mr Preston, then 23, may have "been murdered and buried in a specific area near junction 5 of the M53", said Supt Ian Hassall.
Officers are carrying out an "extensive land search" in the Eastham area of Wirral, Merseyside Police said.
Supt Hassall said Mr Preston was last seen by his mum, Isobel, as "he waved from his bedroom window to her when she left for work at 08:45" BST from their home in Heath Road, Bebington.
"Isobel said there had been no arguments and Steven had left home without his jacket or prescription for medication he was on", he said.
He was reported missing five days later but was never found.
"Today a painstaking search is being carried out following information recently obtained by detectives, which suggest that Steven may have been murdered and buried in a specific area of land near to junction 5 of the M53 motorway", Supt Hassall added.
Mr Preston's sister, Jane, said she was "anxious to find out what happened to her brother after all these years."
She said he was "a gentle, kind and funny lad" who "didn't have a nasty bone in him."
"He adored my mum and it destroyed her when he disappeared. She knew instantly that he wouldn't have just left and never contact her again and that something awful must have happened to him", she said.
Supt Hassall appealed for information, saying: "Sadly, Steven's mother, Isobel, and half-brother, Michael Connolly have died since his disappearance, never knowing what had happened to him.
"A young man in 20s doesn't just leave home and vanish into thin air. Somebody, somewhere must know where he is, or what happened to him."
The number of houses being built in the UK fell during the final three months of 2014, the first such decline for nearly two years.
[NEXT_CONCEPT]
A man has appeared in court after cannabis with an estimated street value of £90,000 was seized in Aberdeen.
[NEXT_CONCEPT]
New information suggests a man who disappeared almost 25 years ago may have been killed and buried on land in Merseyside, police say.