Builders broke ground in August on the most houses in nine months, led by a jump in multifamily dwellings that overshadowed a decline in construction of single-family homes.

Housing starts rose 1.5%, to an annual rate of 598,000, as expected, figures released Thursday by the Commerce Department showed.

Single-family projects dropped 3%, their first decline since January, but work began on 25% more multifamily units.

Builders may be pulling back as the expiration of the government's tax credit for first-time homebuyers nears. The incentive, plus foreclosure-driven price declines, helped boost sales in recent months, and companies may not want to be caught with excess supply should the program not be extended.

"These tax incentives often borrow from future sales, and the pickup does not last," Chris Rupkey, the chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. "This does not throw the recovery idea into a tailspin," he said, "but the housing normalization will come at a slow, measured pace."

Starts were projected to rise to a 598,000 annual pace, from 581,000 initially reported for July, according to the median of forecasts by 74 economists surveyed by Bloomberg News. Their estimates ranged from 570,000 to 640,000.

Permits, a sign of future construction, climbed 2.7% in August, to a 579,000 annual rate, also led by an increase in multifamily dwellings.

The economists had projected a rise to 583,000.

Construction of single-family houses, which account for about 85% of the industry, fell to a 479,000 rate, the first decline since January.

Work on multifamily units, which make up the rest of the market and are often volatile, jumped to a 119,000 rate.

The increase in starts was led by a 24% increase in the Northeast. The rise was 0.9% in the Midwest, but the South fell 2.4%. The West was little changed.

Volatility in multifamily projects has obscured the underlying improvement in residential building. Construction of apartments and condominiums surged 56% in May only to slump by 21% and 15% the next two months.

Americans are taking advantage of the Obama administration's $8,000 tax credit for first-time homebuyers that expires Nov. 30.

Those with jobs, the cash to make down payments and good credit scores are picking up bargains as record foreclosures have driven home prices down about 32% from their peaks in mid-2006, according to the S&P/Case-Shiller index. Combined sales of new and existing homes rose in the four months though July.

A report Wednesday showed that gains in sales and buyer traffic pushed builder confidence this month to its highest level since May 2008.

The luxury builder Toll Brothers Inc. is among companies that see demand improving, even as losses mount.

"In the last six months, we see a pretty significant change in some markets," chief executive Robert Toll said in an interview Aug. 27. "People are now concerned with missing the market."

The expiration of the tax credit may produce a downdraft in sales and construction, Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, said before Thursday's report.

The housing market is unlikely to recover fully until the unemployment rate stops rising and the economy begins creating jobs, he said.

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