U.S. home building rose slightly in January, but not enough to signal that the housing sector is ready to recover from the worst downturn in decades.
Home construction last month increased 1.5% to a seasonally adjusted annual rate of 699,000 from December, the Commerce Department said Thursday.
The results were better than forecast. Economists surveyed by Dow Jones Newswires expected housing starts would rise by 3.0 % to a seasonally adjusted annual rate of 677,000.
Last month's increase was driven by a 8.5% gain in multifamily homes with at least two units, a volatile part of the market. Construction of single-family homes, which made up about 73% of housing starts, fell by 1.0%.
December's figures, meanwhile, were better than originally reported, with only a slight fall for overall housing starts and a 12% gain for the vital single-family sector.
The data also showed newly issued building permits, a gauge of future construction, rose by 0.7% in January from a month earlier to an annual rate of 676,000. Those results were slightly lower than expected, as permits in January had been projected to rise by 1.3% to an annual rate of 680,000.
The housing sector has been gradually healing after a collapse in prices that started 5 1/2 years ago. A trade group report earlier in the week said home builders' confidence this month rose to its highest level in more than four years, with traffic from prospective buyers rising.
Mortgage rates have been hovering around the lowest recorded levels and employers have picked up hiring, causing some home buyers to be more confident about their prospects. While unemployment in the U.S. remains high at 8.3%, the jobless rate in January fell to its lowest since February 2009.
Builders have started construction on about 1.5 million new homes per year, on average, since records started being kept in 1959. Last year, the industry started construction on only 609,000 homes. While that was the best year since 2008, it was still the third-worst year on record.
Builders are keeping construction below normal levels because they still face stiff competition from a steady stream of deeply discounted foreclosures and other previously occupied homes. Mortgage-lending standards, meanwhile, remain tight.
The Commerce Department data showed that housing starts rose in three out of four U.S. regions. The biggest climb was in the South, where starts rose by 18.3%. They rose by 11.9% in the West and 7.9% in the Northeast but fell by 40.7% in the Midwest.
Actual housing starts, calculated without seasonal adjustments, grew to 45,900 in January from an upwardly revised 43,000 in December. Lumber and commodities markets watch those numbers closely to gauge demand.
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