The Commerce Department said groundbreaking for new housing rose 5.3% in January to a seasonally adjusted annual rate of 1.651 million units following a 0.3% gain in December. January's gains were seen across-the-board in single-family homes, townhomes and apartment buildings.
But while starts rose sharply, the gains were not widespread geographically. The Midwest showed the lion's share of the strength with a massive 44.5% increase after a particularly weak, weather-marred December.
Starts gained 4.9% in the South. But groundbreaking for housing in the Northeast, hit by harsh weather in recent months, declined 21.3%, and in the West dipped 7.0%.
The sharp jump in January suggested that interest rate cuts by the Federal Reserve, aimed at boosting slowing economic growth, have increased confidence among builders that housing sales will be higher in the months ahead.
January's gain was much stronger than the 1.573 million starts forecast by economists. Housing starts have generally been trending lower since hitting their recent peak in February of last year. In a sign of possible further strength ahead, building permits for future building projects rose a strong 12.6% in January to a seasonally adjusted annual rate of 1.697 million units after a 5.7% decline in December.