U.S. homebuilding fell in January as the construction of multi-family housing projects dropped, but upward revisions to the prior month's data and a jump in permits to a one-year high suggested the housing recovery remained on track.
Housing starts declined 2.6 percent to a seasonally adjusted annual rate of 1.25 million units, the Commerce Department said on Thursday.
December's starts were revised up to a rate of 1.28 million units from the previously reported 1.23 million pace.
Homebuilding was up 10.5 percent compared to January 2016. Permits for future construction jumped 4.6 percent in January to a rate of 1.29 million units, the highest level since November 2015.
Economists polled by Reuters had forecast groundbreaking activity slipping to a rate of 1.22 million units last month and building permits rising to a 1.23 million pace.
The housing market recovery is being driven by a strong labor market, which is boosting employment opportunities for young people and supporting household formation.
Higher mortgage rates could, however, slow demand for housing.
A survey on Wednesday showed homebuilders' confidence slipped in February but remained at levels consistent with a growing housing market.
Builders anticipated a slowdown in buyer traffic and continued to grapple with shortages of developed lots and skilled labor.
Homebuilding last month surged 55.4 percent in the Northeast. It jumped 20.0 percent in the South to the highest level since August 2007. Starts fell in the West and Midwest.
Last month, single-family homebuilding, which accounts for the largest share of the residential housing market, climbed 1.9 percent to a pace of 823,000 units.
Starts for the volatile multi-family housing segment tumbled 10.2 percent to a rate of 423,000 units.
Single-family permits slipped 2.7 percent last month after increasing for five consecutive months. Building permits for multi-family units soared 19.8 percent.