Washington, Feb. 19 (Bloomberg) -- U.S. housing starts rose in January to the highest level in almost two years, a sign the market for new homes is helping underpin the economy, government statistics showed. Builders started work on 1.678 million homes at an annual pace last month, up 6.3 percent from the revised 1.579 million- unit pace in December, the Commerce Department said. That compares with an average 1.43 million homes started each year in the last decade. A 30-year fixed mortgage rate that fell to a record low of 6.45 percent in November spurred sales and boosted orders at builders including Beazer Homes Inc. and Standard Pacific Corp. It also led to increased profits last quarter at Pulte Homes Inc., the nation's largest builder, and that may continue this year. ``Low mortgage rates have been the main driver for the housing industry,'' said Ryan Brecht, a market analyst at Standard & Poor's MMS in Belmont, California, before the report. ``Expect the housing market to remain buoyant at least through the first quarter.'' Starts in January were the strongest since a 1.745 million- unit pace in February 2000, Commerce officials said. Analysts had expected starts to rise to 1.6 million units at an annual pace from the previously reported 1.57 million-unit rate in December. Starts of single-family homes increased 3.5 percent in January to a 1.345 million-unit rate. January starts of multifamily homes rose 18.9 percent to a 333,000 annual rate.

Building Permits
Building permits, an indicator of future construction, increased 3.1 percent to 1.706 million units at an annual rate, the fastest in a year, after rising 3.7 percent the previous month. By region, starts rose 8.7 percent in the Northeast to 162,000 units at an annual pace, and 14.4 percent in the South to an annual rate of 800,000. The pace of starts in the South was the fastest since January 2000. Starts fell 0.3 percent in the Midwest to 339,000 and 3.6 percent in the West to a 377,000 rate. January housing completions fell 7.9 percent to 1.564 million units at an annual rate from 1.699 million in December. The rate on a 30-year fixed mortgage averaged 7 percent in January, down from an average 7.07 percent the previous month, according to data from Freddie Mac, the No. 2 buyer of U.S. mortgages. The rate reached a record low in November and helped push sales to a record 900,000 new homes last year, according to Commerce figures.

An Investment
As stock prices fell last year, reflecting a drop in earnings with the economy in recession, housing gained importance as an investment, analysts said. The stock prices of the 500 largest companies in the Standard & Poor's index fell 13 percent last year. The median price of an existing home rose 5 percent during the same period. ``Given the troubles in the stock market, housing looks like an even more attractive investment,'' said Brecht. ``Together with low mortgage rates, that makes housing affordable and a good investment.'' That explains the increase in orders at builders. January orders at Beazer, the country's ninth-largest homebuilder by homes sold, rose 7.3 percent to 944 homes from the same month last year. Standard Pacific, which builds in California, Arizona, Texas and Colorado, reported a 24 percent increase in January orders. Builder profits are also on the rise. At Pulte, fourth- quarter profit rose 40 percent from the same period the previous year and its 2002 results will beat expectations, the company said last month. That's reason for optimism. The National Association of Home Builders reported last week that its February housing market index fell to 58 from 60 the previous month. Still, a reading higher than 50 signals that a majority of builders are optimistic. The index has been above that level for three consecutive months.