(CN) – Housing starts, which track new residential construction, jumped by 9.7 percent in January to the highest level since October 2006, the Commerce Department said Friday.
The robust growth was largely driven by the Northeast, where home construction soared 45.5 percent. It rose 10.7 percent in the West and grew 9.3 percent in the South.
The only unsatisfactory news came from the Midwest, a region that was hard hit by cold and snow during the month and where homebuilding dropped 10.2 percent.
Lawrence Yun, chief economist for the National Association of Realtors, said overall the report is “terrific news” because the rise in single-family construction will help tame home price growth, and the increase in multifamily units should continue to help slow rent growth.”
Yun was particularly cheered by the large gain in housing starts in the West, a region he said “has been facing acute housing shortages.”
According to the government, housing starts came in at an annual pace of 1.33 million in January, up from 1.21 million in December and 1.24 million in January 2017.
Construction of single-family homes rose 3.7 percent. Construction of apartments and condominiums shot up 19.7 percent, the most since December 2016.
Building permits, an indicator of future construction, rose 7.4 percent in January.
The uptick in housing construction comes as mortgage rates rise. The 30-year fixed-rate mortgage rose to 4.48 percent, the highest level since April 2014, as tracked by Freddie Mac.
Yun said the boost in housing supply that the Commerce Department numbers represent will not help the economy, but may also help the Federal Reserve temper the pace of future short-term rate hikes.
“That’s because the slow upward creep in the broad consumer price inflation is principally being driven by rising housing costs. Simply put, more housing supply means a lower inflation rate, and potentially a slower pace of interest rate increases by the Fed,” the economist said.