New home starts surged 14.6% to a seasonally adjusted rate of 596,000 in January, thanks to a red hot multifamily market that rose 77.7% during the month, according to numbers released today by the U.S. Census Bureau today. Single-family home starts dropped, however, to a rate of 413,000, a 1% decline from the previous month, indicating that the market is still weak.

The report prompted mixed responses. Patrick Newport, U.S. Economist at IHS Global Insight, was decidedly optimistic, stating that “this will be the year that things finally start to turn.” Noting that job growth was key, he predicted that the economy will add close to 2.3 million jobs in 2011 and 2.6 million more in 2012. “New jobs will require that new homes be built nearby,” he said in a press release today. “More important, the household formation rate will pick up once job growth takes off. Increases in the household formation rate will then reduce the housing glut, which will stimulate new construction. … Housing starts will bounce back from 586,000 units in 2010 to 680,000 units in 2011 and 1.097 million in 2012.”

However, not everyone was feeling as optimistic. Ellen Zentner, a senior macro economist at Bank of Tokyo-Mitsubishi UFG Ltd. in New York, predicted a rate of 555,000, telling Bloomberg News that “housing activity is going to remain at depressed levels this year.”

Regionally, starts were up by the most in the Northeast, which saw a rise of 41.8%, although single-family starts dropped 12.8% in the region from the previous month. The Midwest gained 36.4% overall and 25.5% in single-family units. The South totaled a 15.8% increase, but dropped 7.7% in single-family units. And the West reversed the trend, declining 9.7% overall but saw an uptick of 5.4% in single-family homes.

On an annual basis, every region was lower for both totals and single-family units, except for the Northeast, where January’s large gains in total starts pushed the number up 11.4% from the previous year.

Permit numbers were somewhat skewed by building code changes in California, New York, and Pennsylvania that went into effect in January, encouraging builders to pull permits in December, eating into January’s numbers. Overall, permits dropped 10.4% to reach a seasonally adjusted level of 562,000. Here, single-family fared better, dropping only 4.8% from the previous month, to a seasonally adjusted rate of 421,000.

Permits for multifamily housing of five units or more fell a steep 22.4% from December to a seasonally adjusted annual rate of 125,000.

On an annual basis, total starts were down 2.6% in January from the previous year, with multifamily starts clocking in with an 81.9% gain and single-family starts down 19.2%. Permits recorded a 10.7% drop, with single-family down 17.3% from the previous year and multifamily permits for structures of 5 units of more up 23.8% year over year.

Claire Easley is senior editor, online, for Builder.

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