Contractors work on the roof of a home under construction in Charlotte, North Carolina. Photographer: Luke Sharrett/Bloomberg

U.S. new-home construction rebounded by more than expected in January amid strength in single-family starts and a nine-month high for permits, signaling the market is stabilizing thanks to lower mortgage rates.

Residential starts rose 18.6% to a 1.23 million annualized rate after a downwardly revised 1.04 million in the prior month, according to government figures Friday that were delayed two weeks by the federal shutdown. Permits, a proxy for future construction, rose 1.4% to a 1.35 million rate, compared with forecasts for a decline.

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