Housing starts rose 4.4% in December to an annualized pace of 1.09 million, much better than expectations.
Expectations were for housing starts to rise 1.2% from the prior month to an annualized pace of 1.04 million.
Building permits, however, declined 1.9% to a pace of 1.03 million, missing expectations.
Building permits were expected to rise 0.8% from last month to an annualized pace of 1.06 million.
Following the report, Ian Shepherdson at Pantheon Macro said, "In one line: Starts look good but the increase is not sustainable."
Shepherdson added that, "The fundamental problem for homebuilders is that the pool of new buyers able to qualify for a mortgage is rising much less quickly than payrolls, if at all, and inventory is a bit too high."
This report follows homebuilder sentiment data on Tuesday that showed sentiment among homebuilder remaining elevated, but moving roughly sideways month-on-month.
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