Home building rebounds, but ...

NEW YORK (CNNMoney.com) -- The pace of homebuilding rebounded in December, as the government's latest reading on the battered industry came in much stronger than expected, even as single-family home construction remained weak.

Housing starts jumped to an annual pace of 1.64 million last month from a revised 1.57 million rate in November, the Commerce Department reported Thursday. Economists surveyed by Briefing.com had forecast a 1.57 million rate.

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Building permits, seen as a measure of builder confidence, jumped 5.5 percent to an annual rate of just under 1.60 million from the nine-year low of 1.51 million in November. Economists had forecast permits would edge lower from the November reading.

While an exceptionally warm December in the Northeast might have boosted the housing starts number, weather generally has less of an impact on building permits.

And while the warm weather helped the Northeast post a 25 percent jump in starts, much of that was in multifamily units. Single-family starts fell from November and a year earlier even in the region that got its biggest lift from weather.

Nationwide, single-family home starts slipped 4 percent. Meanwhile, the number of units started in buildings with five or more residences jumped 30.6 percent in December.

For the full year, housing starts tumbled about 13 percent in 2006, while single-family homebuilding sank 15 percent and units in buildings with five or more residences slipped about 6 percent.

Bernard Markstein, director of forecasting for the National Association of Home Builders, said that multifamily housing starts can swing widely from month to month.

He explained for that reason his group is focused on the continued weakness in single-family homes. Starts on single-family homes last month were the second-lowest since early 2001, ahead of only last October.

The South, which accounts for about half of the homebuilding in the nation, saw housing starts slightly below November levels and well off of year-earlier results. For the nation as a whole, total starts remained 18 percent below December 2005.

Still, the stronger permits were one sign of builders hoping the market has bottomed out and there could be improvement in the coming months.

"Getting a permit doesn't mean they'll start building tomorrow, but maybe three to six months from now they'll start some projects again," said Markstein. "It's definitely a very weak market, but it seems like indicators are showing an uptick in buyer traffic and demand. There's clearly still too much supply on the market. But once that's worked off, builders can increase their activity again."

The group's monthly survey released Wednesday found the builder confidence index improving to 35 from 33. While that's still far from a reading of 50 that would indicate a balance between market strength and weakness, it was the fourth increase in the past five months and the best reading since July 2006.

The nation's leading homebuilders, including Lennar (Charts), Pulte Homes (Charts), Centex (Charts), D.R. Horton (Charts), KB Home (Charts) and Toll Brothers (Charts), have all seen their sales hit by the slowdown in housing and the drop in new home prices.

On Wednesday, Lennar became the latest to report problems as it posted a wider than expected loss in the fiscal fourth quarter.

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