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New US housing starts expected to have cooled in January, analysts say

PUBLISHED : Wednesday, 20 February, 2013, 12:00am
UPDATED : Wednesday, 20 February, 2013, 4:40am

New residential construction cooled in January and US existing-home sales slowed after the strongest year since 2007, representing a break in the momentum for the industry, economists predicted before reports this week.

Builders started work on 920,000 houses at an annual rate following December's 954,000 pace, which was the fastest since June 2008, according to the median forecast of 73 economists surveyed by Bloomberg before Commerce Department data is released later today. Purchases of previously owned properties fell, while the cost of living was contained, other figures may show.

More hiring and easier access to credit would help complement historically low mortgage rates and further stoke a housing market that emerged last year as a bright spot for the economy. Low inflation is providing Federal Reserve policymakers with the scope to hold down borrowing costs, minutes of their January meeting may show this week.

"The January numbers for housing will be a bit softer after the exaggerated strength toward the end of the year," said Josh Shapiro, chief US economist at Maria Fiorini Ramirez Inc in New York. "Housing will recover at a modest pace this year."

For all of last year, builders began work on 780,000 homes, a 28 per cent increase from 2011 and the third straight annual gain. Even with the yearly improvement, housing starts remain short of the 2.07 million in 2005 at the peak of the boom.

However, the Commerce Department may also report that building permits, which are a proxy for future construction, climbed 1.2 per cent in January to a 920,000 annual rate, the highest figure since July 2008.