U.S. housing starts rose more than expected in December as groundbreaking for single-family homes hit its highest level in more than 6-1/2 years, in a hopeful sign for the sluggish housing market recovery.
Starts increased 4.4 percent to a seasonally adjusted annual pace of 1.09 million units, the Commerce Department said on Wednesday.
November's starts were revised up to a 1.04 million-unit pace.
For all of 2014, groundbreaking increased 8.8 percent to 1.01 million units, the highest since 2007.
Economists polled by Reuters had forecast starts rising to a 1.04 million-unit pace from November's previously reported 1.03 million-unit rate.
Housing has lagged an acceleration in economic growth as tepid wage gains sideline first-time buyers from the market and force many young adults to stay at home with parents or share lodgings with relatives and friends.
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The resulting weak household formation, in particular, has hurt residential construction. Higher house prices, mortgage rates and stringent lending practices by financial institutions have also been a constraint.
Single-family homes starts, the largest part of the market, jumped 7.2 percent to a 728,000-unit pace, the highest level since March 2008. Groundbreaking on single-family projects in the West hit a seven-year high, while starts in the Midwest were the highest since December 2011.
Groundbreaking in the volatile multi-family homes segment fell 0.8 percent to a 361,000-unit pace.
Permits for future home construction fell 1.9 percent to a 1.03 million-unit pace. Permits have been above a 1 million-unit pace since July.
Single-family permits rose 4.5 percent to their highest level since January 2008, while multi-family permits tumbled 11.8 percent.