Housing Starts Fall 4.3%; Permits Surge 16.7%

WASHINGTON — December housing starts dropped 4.3% to an annualized rate of 529,000 even as building permits headed the other way, jumping 16.7% to 635,000, according to Commerce Department data released Wednesday.

Federal officials indicated that the surge in building permits may be related to changes to state building codes for new residential construction effective in January 2011 in California, Pennsylvania and New York.

Economists expected 550,000 starts and 560,000 building permits in December. November building permits were revised higher to 544,000 from 530,000, and housing starts were revised to 553,000 from 555,000.

For all of 2010, housing starts totaled 587,600 at an annual rate, up from 554,000 in 2009. That compares with more than two million housing starts in 2005 — the height of the real estate boom. Building permits in 2010 totaled 598,200, up from 583,000 in 2009.

“The housing market helped get us into this mess; now it looks as though it will remain a drag on the economy for some time to come,” said Diane Swonk, chief economist of Mesirow Financial. “Housing starts plummeted from a 553,000 rate in November to a 529,000 unit rate in December, capping off the second-weakest year for housing construction in half a century.”

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