(CN) - Home building across the United States fell in January, led by a drop in apartment construction, although developers did report breaking ground on more single family homes.
The U.S. Census Bureau announced Thursday that the construction of new houses and apartments declined 2.6 percent in January to a seasonally adjusted annual rate of 1.25 million.
Single family housing starts rose 1.9 percent while apartment building dropped 7.9 percent.
Even with the decline, new home construction has increased 10.5 percent in the past year. That gain has been fueled by rising demand for homes as more people are looking to buy.
But the housing market continues to suffer from a lack of available properties.
The supply of existing homes fell in December to its lowest level since 1999, and that has pushed prices higher. Home builders have responded by ramping up construction, but the increases haven't been fast enough to relieve supply shortages.
These factors, combined with higher mortgage rates, slowed sales of existing homes in December, when they fell 2.8 percent.
The average rate on 30-year fixed-rate loans was 4.17 percent last week, down from 4.19 percent the previous week, but sharply higher than the 3.65 percent average for all of 2016, according to Freddie Mac.
Building permits, a gauge of future construction, rose 4.6 percent last month, led by a big gain in apartment permits. Single-family permits fell.
Home building increased the most last month in the Northeast, where housing starts soared 55.4 percent, and the South, with a 20 percent rise.
Developers broke ground on the most new homes in the South in more than nine years.
For all this, homebuilders appear to be feeling less confident than they have been in recent months, according to a survey released Wednesday by a leading industry trade group.
The National Association of Home Builders/Wells Fargo builder sentiment index fell to 65 this month. -- down two points from a revised reading of 67 in January.
Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September.
The latest reading marks the second decline in a row for the index, which reached the highest level in 11 years in December.
Sales of new U.S. homes climbed to 563,000 last year, an increase of 12.2 percent from 2015.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.