New home construction increased to more than a one-year high in January, boosted by a rebound in the building of single-family housing units, and further gains are likely as building permits soared to their highest level since 2007.
Housing starts jumped 9.7 percent to a seasonally adjusted annual rate of 1.326 million units, the Commerce Department said on Friday. That was the highest level since October 2016 and followed an upwardly revised sales pace of 1.209 million units.
Economists polled by Reuters had forecast housing starts rising to a pace of 1.234 million units last month after a previously reported rate of 1.192 million units.
Building permits surged 7.4 percent to a rate of 1.396 million units in January, the highest level since June 2007.
Demand for housing is being driven by a tightening labor market, but rising mortgage rates and house prices could slow the momentum. Despite the unemployment rate being at a 17-year low of 4.1 percent, annual wage growth has not exceeded 3 percent.
In contrast, the annual house price increase topped 6 percent in November. The 30-year fixed mortgage rate rose to an average of 4.38 percent this week, the highest level since April 2014, from 4.32 percent in the prior week, according to mortgage finance agency Freddie Mac.