Housing Starts in Jan. at Fastest Pace Since 1986; Rates Help Lift Demand

U.S. builders in January broke ground for homes at the fastest rate in more than 16 years, the government said Wednesday, surprising analysts but leading some to wonder whether the resilient housing sector has peaked.

“You’d think that until the job market is showing sustainable improvement, how much of this can you do?” said David Seiders, chief economist for the National Assn. of Homebuilders.

Home buyers bought new and existing homes at record levels, and builders poured cash into residential construction at an unprecedented pace in 2002 as mortgage rates hit lows not seen since the mid-1960s.

Buyers have benefited from low rates in 2003 as well, with the popular 30-year mortgage below 6% for an unprecedented eighth straight week, mortgage financier Freddie Mac reported last week.

However, snowstorms that blanketed the East Coast over the weekend slowed chain store sales and probably will dent home sales and building this month, economists said.

An index of home-builder confidence also slowed for the second straight month after posting a record high in December, the home builders trade association said Wednesday.

Fewer homeowners and buyers applied for mortgages in the first week of February, possibly because of cold weather and war jitters, the Mortgage Bankers Assn. of America reported last week. Applications still are at historically high levels, the trade group said.

U.S. housing starts climbed unexpectedly in January, rising 0.2% to the highest rate since mid-1986, the Commerce Department said Wednesday, as rates helped fuel demand for new homes.

Total permits to start housing construction, an indicator of builders’ confidence in future business, fell 5.6% last month because of a drop in authorizations for multifamily homes, the government said. But single-family permits -- the largest category of housing starts -- rose to a new high.

Housing starts edged up to a seasonally adjusted annual rate of 1.85 million units last month from a revised 1.847 million in December. Overall starts were at their highest since May 1986, while single-family starts reached their highest rate since November 1978.