Housing starts hit a 13-year high in January, highlighting the vitality of a sector that has been a key driver of the economy and a big contributor to the booming mortgage market.

Starts rose 3.8% last month to a seasonally adjusted annual rate of 1.80 million units, the Commerce Department reported Wednesday. Building permits were up 2.8%.

Single-family home starts advanced in January to an annual rate of 1.394 million units, rising from 1.378 million in December and 1.375 in November. It was the fastest sustained clip since 1978.

"Low mortgage rates, strong income growth and consumer confidence have kept housing activity strong," said economist Stan Shipley of Merrill Lynch & Co., New York.

Mr. Shipley noted that each additional completed single-family home contributes around $120,000 to gross domestic product, and every 100,000 new homes add about 0.2 percentage points to the nation's economic growth rate.

In addition, multifamily starts jumped 24% in January to a 410 million- unit rate, after a surge of 29% in December.

Most economists doubt that the housing market can keep gaining momentum at such a pace, but they do not anticipate a major slowdown.

That also appeared to be the message in the latest housing market index from the National Association of Home Builders. It eased downward in February, the trade group said Tuesday, but remains just under all-time highs reached in November and December.

The index reflects the number of single-family home sales, traffic of prospective buyers and, to a lesser extent, builders' projections of sales for the next six months. The index fell three points, to 73, for the second monthly decline in a row. The index peaked at 78 in November and December.

On the index's scale of 0 to 100, "a healthy market would rank in the low 60s," Mr. Kochera said.

"Even though the numbers are still very high, we are edging down over the last four months and beginning to see some settling in the market."

The index reached its highs when sales of new single-family homes reached annual rates of 978,000 units in November and 1.015 million units in December.

Michael Carliner, a vice president of economics for the association, said mortgage lenders need not worry about the rate slip.

"The very strong new home sales of November and December have not had mortgages underwritten yet, and they will not close until the spring," Mr. Carliner said.

"In terms of home purchase originations, the market may not have peaked out yet."

He predicted more speculative building as the market slows.

"There are people who want to buy a house but do not want to wait six months to have it built," Mr. Carliner said. Having too many unsold homes is always a worry, he said, "but right now there are too few."

Mr. Carliner said the association expects starts of single-family homes to decline about 6% this year, to a yearend total of 1.21 million. He predicted that actual sales would decline even further.

"In 1997, there were 804,000 single-family houses sold, and last year there were 888,000 sold," Mr. Carliner said. "We think there will be about 823,000 houses sold in 1999."

Charlie Ruma, a home builder from Columbus, Ohio, and the association's president, said the index for current sales of single-family homes was down six points this month, and that builders continue to be concerned about the shortages of skilled workers and lots.

In February, sales of single-family houses fell six points to 79, but the rating for projected sales during the next six months rose one point to 79.

The association reported that the indexed score of traffic of prospective buyers remained unchanged, at 55.

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