Jan home starts up 0.8 percent, permits lowest in 16 years

A worker takes a measurement on a new house under construction in the Green Valley Ranch development in Denver, July 26, 2007. Permits to break new ground on homes in January decreased 3 percent, as expected, to the lowest rate in more than 16 years while housing starts rose 0.8 percent, also roughly in line with forecasts, showing signs of more struggles ahead for the downtrodden housing market.

WASHINGTON (Reuters) - Permits to break new ground on homes in January decreased 3 percent to the lowest rate in more than 16 years while housing starts rose 0.8 percent, showing signs of more struggles ahead for the housing market.

Permits slipped to a 1.048 million annual rate, the weakest showing since 984,000 in November 1991. Analysts were expecting this key indicator of builder confidence in future housing activity to drop to 1.04 million.

Starts rose to a 1.012 million annual rate, but it was only a slight rebound from the revised 1.004 million pace in December, which was the lowest pace for starts since May 1991.

"Housing continues to be an area that will act as a drag on the economy going forward, so no surprises there," said Kevin Flanagan, fixed income strategist for Global Wealth Management at Morgan Stanley.

In the report, Multi-family starts jumped 22.3 percent to 269,000.

But overall housing starts fell 2.9 percent in the South and 6.2 percent in the West. They rose 12 percent in the Midwest and 18.9 percent in the Northeast.

(Reporting by Mark Felsenthal; Editing by Joanne Morrison)