Housing starts showed a surprise increase of 4.5% in December, according to new government figures Jan. 18. The number of housing starts spiked to a seasonally adjusted rate of 1.642 million units, the Commerce Department said.

Most economists had forecast that starts would fall to around 1.570 million units.

Despite December's month-on-month gain, starts were down a sharp 18% compared with December 2005 when starts were at 2.002 million units.

The number of new homes under construction fell 0.9% last month compared with November, as the number of freshly-painted properties being erected dropped to 1.255 million units

Other data in the report showed a continued decline in new home construction, but that building permits -- a leading indicator of future trends -- rose. Building permits gained 5.5% in December on the month to an annual pace of 1.596 million units.