NEW YORK (TheStreet) -- Homebuilders began construction on more houses in 2013 as home prices rose amid an acute shortage of inventory.
Housing starts rose 18% to 923,400 units in 2013, the highest since 2007. Still, housing starts remain below pre-crisis normal levels of about 1.5 million units a year.
New residential construction dropped 9.8% in December to a seasonally adjusted annualized rate of 999,000 from an upwardly revised November estimate of 1.107 million. Year over year, housing starts were up 1.6%.
The December report was better than expectations. Economists polled by Bloomberg expected total housing starts to drop to an annualized rate of 985,000 in December from 1.09 million units originally reported in the previous month.
Single-family housing starts were down 7% from the previous month to an annualized rate of 667,000. Multi-family starts fell 18% from November to an annualized rate of 312,000. Multi-family starts tend to be more volatile.
The number of authorized building permits, meanwhile, fell 3% to an annualized rate of 986,000 from an upwardly revised November estimate of 1.01 million. Permits were up 4.6% from a year earlier.Housing completions in December were a seasonally adjusted annualized rate of 744,000, about 10.7% higher than a year earlier.
In 2013, an estimated 762,200 housing units were completed, up 17.4% from the previous year. That was the highest level since 2009.
Multi-family construction led the recovery in homebuilding in 2013, accounting for over 30% of total housing starts. That's the highest share since 1985, Trulia economist Jed Kolko noted via Twitter. (@JedKolko).
Despite the recovery in construction, there were fewer new homes available for sale in 2013. Homebuilders kept inventory lean amid a shortage of labor and materials and instead took advantage of rising prices.
Sales of new homes slowed down in the summer as buyers withdrew from the market following a sharp rise in interest rates in May and June. However, sales picked up toward the end of the year, suggesting there was still demand for new homes.
-- Written by Shanthi Bharatwaj in New York.