New home construction projects that started last month slowed for the first time since August, due to a sharp drop in single-family homes, according to US government data released Thursday.

American builders have struggled to keep up with strong demand for homes, amid rising lumber prices and a shortage of workers, but construction had continued to rise as rock-bottom borrowing rates sparked a buying spree during the Covid-19 pandemic.

In January, new construction projects dropped 6.0 percent compared to December, falling by one million to a seasonally-adjusted annual rate of 1.58 million units, the Commerce Department reported.

The decline came as single-family homes fell 12.2 percent, offsetting a 16.2 percent jump in apartment buildings, the report said.

The declines were widespread across the country, with only the Northeast showing an increase.

Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Florida, noted the rising cost of lumber despite strong buyer demand.

But that demand for homes has pushed prices up and reduced supply.

"With the cost of building materials rising at a rapid pace, the challenge for builders is to keep home prices at an affordable level for buyers," Fowke said in a statement.

However, building permits issued in January jumped 10.4 percent, indicating more supply in the pipeline.

Nancy Vanden Houten of Oxford Economics said the supply constraints, including shortage of building lots and workers, are likely to slow the pace of housing starts in coming months.

"However, we still expect recovering demand, low mortgage rates and a shortage of supply to support a healthy rate of new home construction, and the risk may be for further upside surprises," she said in an analysis.

hs/dw