WASHINGTON -- U.S. starts of home construction unexpectedly increased last month and permits for new projects climbed to the highest level in a year, suggesting that builders will stay busy in the months ahead even as interest rates rise.
Housing starts rose 1.5 percent last month to a seasonally adjusted annual rate of 1.775 million units after jumping 5.1 percent in December, the Commerce Department said yesterday.
January's increase was paced by a 17.7 percent surge in starts of apartment buildings and other multifamily projects. Construction of single-family houses fell 2.1 percent. The West led the nation with a 7.3 percent increase, while starts fell in the Northeast, where a winter storm halted construction.
The report showed that permits for all new housing construction rose 8.7 percent in January to an annual rate of 1.763 million units -- the highest since January 1999. Permits for single-family homes rose to the highest annual pace since last February.
That "makes it clear that, higher rates notwithstanding, new home construction will continue at a breakneck pace for several months to come," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa.
Since reaching a 12-year high pace of 1.82 million units in January of last year, starts had been tapering off as mortgage rates gradually climbed. Thirty-year fixed-rate mortgages averaged 8.36 percent last week, up from 7.74 percent in November and 6.72 percent in December 1998.
Adjustable rate mortgages have started to creep up as well. One-year adjustable-rate mortgages rose to a five-year-high of 6.73 percent last week from 6.36 percent in November and 6.5 percent during the last week of December.
The National Association of Home Builders reported last month that its housing market index fell to 71 in January from 72 in December. The index peaked at 78 in December 1998. The scale runs from zero, which represents the weakest conditions for home sales, to 100.