NEW YORK (CNNMoney.com) -- New home construction rose more than expected in January, while the number of building permits issued in the month dropped, according to a government report issued Wednesday.
Construction of new homes climbed to an annual rate of 591,000 during the month, up 2.8% from December's revised rate of 575,000, the Commerce Department said. This is an increase of 21.1% from the 488,000 rate in January 2009.
Economists surveyed by Briefing.com expected January housing starts to rise to an annual rate of 580,000.
"We're continuing to see signs of stabilization," said real estate analyst Mike Larson of Weiss Research. "We had this Olympic ski slope-looking plunge starting in 2005 and 2006, and it looks like we're almost getting to the bottom of that."
Larson said that housing starts picked up in January as the new home supply dwindled.
"All the excess inventory that had built up has been exhausted, and when the supply gets so lean, builders start constructing homes again," he said.
The number of building permits issued during January fell to a seasonally adjusted annual rate of 621,000. That was 4.9% below the revised December rate of 653,000, but up 16.9% from the January 2009 rate of 531,000.
Economists had expected building permits would fall to 620,000.
The decline in permits and gain in housing starts were each led by activity in the multi-family sector: Multi-family building permits plummetted 26% while starts jumped 17.6%.
Meanwhile, single-family housing starts and building permits were both up last month. Single-family starts climbed 1.5% from December and permits edged up 0.4%.
Larson said that the increase in single-family activity was an encouraging sign of stabilization, but with such a large supply of existing homes, "nothing suggests a vigorous upturn."
HSBC banker arrested at JFK airport as he prepared to leave the country. He and former trader face federal charges they manipulated currency trades. More
With one exception, every vice presidential candidate in the past 40 years has released a tax return. Given that Donald Trump hasn't released his tax returns, will Mike Pence be the second exception? More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
A discount on a student loan from Wells Fargo is now yet another perk Amazon offers its Prime customers. More