New US residential construction improved for a third straight month to the fastest pace in nearly a year, boosted by multifamily projects.  

Housing starts increased 7.2% to an annual pace of 1.49 million homes in January, according to government figures out Thursday. The pace of home starts was above all estimates in a Bloomberg survey of economists. 

The advance was led by a nearly 30% surge in multifamily construction, while single-family home starts declined. Single-family projects fell in the Northeast and the South, which faced a cold spell late in the month.

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Despite the likely impact from wintry weather, the report suggests some momentum at the start of the year as lower mortgage rates alongside generous sales incentives helped lure prospective buyers from the sidelines. That's helping slowly make a dent in homebuilders' bloated inventories and encourage construction.

Still, homebuilder sentiment remains depressed amid persistent worries over affordability and high construction costs. Data out earlier this week showed US mortgage rates posted their biggest weekly increase since September after the war with Iran roiled markets.

Those headwinds may keep a cap on construction in the months ahead. Building permits, which point to future construction, fell 5.4% to an annualized pace of 1.38 million in January, the report showed. Single-family permits declined to the lowest since August. 

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The new residential construction data are volatile, and the report showed 90% confidence that the monthly change ranged from a 6.5% drop to a 20.9% gain.

Separate government data out Thursday showed the US trade deficit narrowed in January by more than expected as exports increased. Meanwhile, applications for US unemployment benefits edged down last week, indicating layoffs remain contained.