WASHINGTON — Housing starts surged in January to their highest rate in four months as builders began work on new apartment buildings and other multifamily units for a nation still reeling from a bust in home prices.
Builders began work on homes at a seasonally adjusted annual rate of 596,000 units, up 14.6 percent from December but still a far cry from the 2 million or more units built at the height of the boom in 2005 and 2006, according to Census Bureau figures.
The increase was far above expectations and entirely due to an increase in the volatile multifamily category, analysts said. Construction started on buildings with five or more units at an annual rate of 171,000 units, the highest level in two years. The rate of starts for single-family homes was the lowest in almost two years.
“The stand-alone home weakness is not a surprise given the massive excesses of the last decade, coupled with tight credit standards and the overhang of foreclosures,” independent economist Joel Naroff said in a note. “What is nice to see is that developers seem to be picking up the slack by putting up rental and condo units instead, a trend that is likely to continue.”
Permits for future home construction dropped sharply after hefty gains the prior month. Naroff said permits were somewhat inflated in December by regulatory changes in some states.
Economists polled by Reuters had forecast housing starts edging up to a 554,000-unit rate. Compared to January last year, residential construction was down 2.6 percent.
The housing market recovery is being hobbled by an oversupply of homes that is depressing prices. A high unemployment rate also means the sector, which was at the heart of the worst recession since the 1930s, will struggle to recover even as the broader economy gains momentum.
An independent survey on Tuesday showed sentiment among home builders hovering near all-time lows in February.
New building permits dropped 10.4 percent to a 562,000-unit pace last month, partially reversing Decembers 15.3 percent surge that came ahead of changes in building codes in three states. Permits were pulled down last month by a 23.8 percent plunge in the multi-family segment. Single-family unit permits fell 4.8 percent.
Analysts had expected overall building permits to fall to a 560,000-unit pace in January.
New home completions fell 9.5 percent to a record low 512,000 units in January.