Builders Digging in, Data Shows

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Home constructionThat roar you heard last month was the sound of builders pounding nails and digging the foundations of new homes, which they did at a faster rate in January than any other time in the last year.

Housing starts rose to a seasonally-adjusted annual rate of 591,000 per year in January, according to the U.S. Census. That makes January the top month so far in what has been a long steady rise in housing starts from its low point at 479,000 last April.

But we're still a long way from a healthy housing market. Put in context, the January numbers are still less than a third the rate in 2006 and less than half the rate in 2007. The economists at Freddie Mac predict the rate of starts will continue to rise, but won't reach 2007 levels until 2011.

Here's another clue that the mini-recovery in home building should continue. Applications for building permits -- a reliable omen of future construction activity -- were made at a quicker pace in January than any month in the last year except December.The annualized rate for building permits in January was 621,000 a year, down from 653,000 in December. That's a 4.9 percent drop, but still much better than the sluggish rate of permitting for in 2009, which seemed stuck in the 500,000 range -- except when it dropped even lower.

What could derail the recovery? Foreclosures. S&P just issued a report predicting a huge rises in foreclosures this year as loans that should have would have gone into foreclosure months ago gained a temporary reprieve, mostly through trial loans modifications through the Federal Home Affordable program.

As of the end of December, more than 850,000 loans have received trial modifications through the program, though only 110,000 loans had been approved for permanent modifications and many pundits seem to be writing the program off.
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