Washington, Feb. 19 (Bloomberg) -- U.S. housing construction unexpectedly rose in January to the highest in almost 17 years as builders started work on homes ordered months ago. Builders broke ground on new homes at an annual pace of 1.850 million units last month, the Commerce Department said. That was up 0.2 percent from December's revised 1.847 million pace and exceeded the median forecast of 1.775 million in a Bloomberg News survey of 61 economists. Starts rose in the West and South. Backlogs of homes ordered and awaiting construction have swelled after the lowest mortgage rates since the 1960s spurred record sales last year. Single-family home construction was the strongest since 1978 and helps explain why economists view housing as a crutch for the economy. ``The strong housing market we are seeing is a response to extremely low interest rates and, because of that, I expect housing to remain strong going forward,'' said Lara Rhame, an economist at Brown Brothers Harriman & Co. in New York.
The average rate on a 30-year mortgage was 5.86 percent last week. That was close to the 5.85 percent at the start of January, which was the lowest since the 1960s, according to Freddie Mac, the No. 2 buyer of mortgages. It was a record eighth straight week below 6 percent. Economists had expected starts to fall 3.3 percent in January to 1.775 million units at an annual rate from a previously reported 1.835 million units in December. The January pace was the fastest since 1.854 million in May 1986. Housing accounts for more than half of all U.S. construction and boosts the economy by stimulating spending on building materials, home appliances and home furnishings.
Single-Family Homes
Starts of single-family homes rose 2.1 percent in January to a 1.510 million-unit rate, the fastest since November 1978. One- family homes account for eight of every 10 houses built. January starts of multifamily homes, such as apartments and condominiums, fell 7.6 percent to a 340,000 annual rate, following a 3.1 percent increase in the previous month. By region, starts rose 9.9 percent in the West and 3.8 percent in the South. Home construction fell 11.9 percent in the Midwest and 16.7 percent in the Northeast. Declines in those regions may have been due to colder weather, economists said. ``It was a very cold January, with snow in the Northeast,'' said Tim Rogers, chief economist at Briefing.com in Boston, before the report. Building permits, an indicator of future construction, fell 5.6 percent to 1.781 million units at an annual rate from 1.887 million units in January. Homebuilders such as D.R. Horton Inc. say demand for houses has been strong. The fourth-largest builder by stock market value said that its revenue increased 66 percent to $1.7 billion in the fourth quarter, fueled by a drop in mortgage rates. It had a record $2.9 billion worth of homes in backlog at the end of 2002, representing 12,435 houses. Last year, 1.706 million new homes were started. That was the most in 16 years and followed 1.603 million in 2001. //www.quote.bloomberg.com