U.S. builders broke ground on 2.1 percent fewer homes in April than in March, a government report showed yesterday. But building permits, a better barometer of current demand, rose 1.2 percent, a strong indication that rising interest rates have not yet put the brakes on the housing market.

Builders began work on 1.97 million homes at an annual rate last month, down from a revised 2.01 million in March, according to the Commerce Department. But the decline was solely in the western part of the country, where starts fell 13.7 percent. In the South, which includes the Washington area, starts rose 1.2 percent; in the Midwest, they rose 4.5 percent; and in the Northeast, 0.6 percent.

"It's just a tiny decline that really doesn't mean anything," said Gina Martin, an economist at Wachovia Corp., one of the country's largest lenders. "People are still out there trying to gobble up as much [real estate] as they can before rates rise further."

Mortgage rates have climbed steadily for the past eight weeks. Rates on 30-year loans have risen almost a percentage point over that time, to 6.34 percent last week, according to mortgage giant Freddie Mac. The rise in rates has been offset, however, by an improving economy and job growth, which have kept demand for new homes high.

Housing starts were up 20 percent this April over April 2003, according to the Commerce Department. The same report showed housing permits -- considered the best indicator of today's demand -- rising 1.2 percent in April, to an annual rate of nearly 2 million units.

Jerry Howard, chief executive of the National Association of Home Builders, said the April drop in starts, which he called a "blip on the radar screen," was largely because of nice weather in some areas in March. That translated into an inordinately high number of housing starts in March, which in turn took away from April starts.

Howard said builders across the country are "very optimistic." He said their only concerns are labor and supply shortages, which are "indicative of high demand and a strong market."

Joel H. Rassman, chief financial officer for Toll Brothers Inc., the country's largest builder of luxury homes, said, "Housing demand is incredibly strong across almost all of the country."

Rassman said the Washington area has been an active region for his firm during the past two decades. "In the last few years, Washington has continued to grow in terms of demand, faster than many other geographical regions," he said.

Economist Martin noted that when interest rates were hovering at about 6.5 percent at the end of 1999 and the beginning of 2000, the housing market was roaring. "We've got a lot of room to maneuver," she said.

Martin said she thinks the big jump in rates has already happened and that rates would drift up slowly during the next 18 months.

For areas such as Washington, though, where "people want to live, where population growth is strong, where job opportunities are prevalent," she said the outlook for housing would remain "good for a long time."

"It's tough for me to see a turnaround in D.C. housing," Martin said. "Population growth alone will drive housing starts there for as far as my eyes can see."