Housing Starts Up 8%; Weather Credited

Spurred by unusually mild weather, new construction of houses and apartment buildings surged 8% in January to the highest level in nearly two years, the Commerce Department said today.

The department said housing starts jumped to a 1.69-million-unit annual rate, the highest level since March, 1987, when houses were started at a 1.72-million-unit rate.

But the number of building permits issued in January, an indication of future construction activity, fell 2.7% to a 1.52-million-unit annual rate after rising 3.3% in December, the department said.

The January rise in housing starts, the biggest increase in a year, followed a revised scant gain of 0.1% in December, which the department previously estimated as a 2.2% decrease.

Despite January’s weather-induced surge in building, the home building industry has been one of the weakest sectors of an otherwise strong economy for more than a year, largely because of an upward creep in mortgage rates and a high vacancy rate in many regions for rental units.

Interest rates on fixed-rate mortgages averaged 10.56% last week, up from 9.84% a year earlier, according to a survey by the Federal Home Loan Mortgage Corp.

Housing starts last year fell 8.2% to 1.49 million units, their lowest level since the recession year of 1982 when only 1.06 million homes were started, the department said.

Economists said much of the pent-up demand among first-time buyers of new houses has already been satisfied in the current economic expansion, now in its 75th month.