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Last Updated: Thursday, 16 February 2006, 16:07 GMT
US housing starts at 30-year high
Houses in San Francisco
The housing market has been expanding at breakneck pace
The US has recorded the fastest pace in construction of new houses for more than 30 years, official figures show.

The Commerce Department's building activity index rose 14.5% in January, pushing construction to an annual rate of 2.27 million units.

This was the fastest rate of growth since March 1973, but was expected to be a one-off blip caused by unusually warm weather in January.

This prompted builders to start work on more homes.

January was the mildest for more than a century.

The 14.5% rise in building activity in January followed a 6.9% fall in December.

Slowdown?

Recent figures showed the US housing boom, fuelled by low mortgage rates, led to record spending on construction last year.

A levelling-out or a modest softening of housing activity seems more likely than a sharp contraction
Ben Bernanke, Fed chief

More than 1.19 trillion (669bn) was spent on building projects last year, 9% higher than in 2004, according to the Commerce Department.

However, most economists believe the housing market will start to slow this year.

Interest rates have risen from 1% to 4.5% over the past 18 months as the Federal Reserve has tried to let some of the steam out of the housing market.

However, last month's 6.8% rise in building permits, which are not affected by the weather, could be a signal that housing activity will not slow as much as previously predicted.

The new Federal Reserve chairman, Ben Bernanke, said he did not expect such a severe slowdown in the housing market.

"A levelling-out or a modest softening of housing activity seems more likely than a sharp contraction," he said this week.


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