Housing starts drop to slowest pace in more than a year

However, building permits, a gauge of future construction, surged 16.7 percent to an annual rate of 635,000. That is still below the December 2009 estimate of 681,000.

The Northeast had the largest increase in permits, up 81 percent, while the West showed a 44 percent increase. Permits were up 3.3 percent in the Midwest and down 7.6 percent in the South.

Home-builder confidence remained flat in January, mainly caused by tight credit that threatens to hold back construction, according to a report released Tuesday by the National Association of Home Builders/Wells Fargo. The sentiment index held at 16, the same as the past two months. Readings above 50 reflect a healthy market.

Construction also was affected by a snowy December in all regions, likely stalling building further during a typically slow time of year.

National Association of Home Builders chief economist David Crowe said last week he expects around a 20 percent increase in housing starts this year, with a stronger spring selling season ahead. 

Single-family housing starts in December were at a rate of 417,000, 9 percent below the revised November figure of 458,000 and the smallest amount since May 2009, according to the Commerce report. 

Work on multi-family homes, such as townhouses and apartments, were up 18 percent to an annual rate of 112,000, the first increase in four months. 

While housing starts could see a boost this year, foreclosures also are expected to rise by about 20 percent, along with a 5 percent drop and bottoming out of housing prices, according to a report last week released by RealtyTrac. 

As the housing market attempts to regain a foothold, Sen. Jeff Merkley (D-Ore.) unveiled a plan Tuesday to help struggling homeowners and to reduce foreclosures as the housing market continues to find its footing. 

“We’re not going to see a true economic recovery until we do something about the broken housing market,” Merkley said.  

The Democrat’s proposal would provide a permanent tax credit for first-time homebuyers and assist families facing foreclosure through a national “short refinance” program that would allow homeowners facing foreclosure to refinance their mortgages based on current interest rates and home values.