US housing starts jumped in April and building permits hit their highest level in nearly six years, offering hope that the troubled housing market could be stabilizing.
The Commerce Department said groundbreaking increased 13.2% to a seasonally adjusted annual pace of 1.07 million units, the highest level since November 2013. All four regions of the country reported increases.
Starts rose by a revised 2% in March, compared to a previously reported 2.8% gain for that month.
Economists polled by Reuters had forecast starts rising to a 980,000-unit rate last month.
The housing market recovery stalled as a combination of higher mortgage rates and rising property prices, against the backdrop of stagnant wage growth, made housing less affordable for many Americans. A cold winter also weighed on activity.
The residential sector contracted in the first three months of 2014, declining for a second consecutive quarter. With the multi-family sector segment continuing to drive residential construction, housing is unlikely to contribute to economic growth this year for the first time since 2010.
The weak housing market recently has caught the attention of US Federal Reserve Chair Janet Yellen, who early this month told lawmakers that it could undermine the economy.
Last month, groundbreaking for single-family homes, the largest segment of the market, rose 0.8% to a 649,000-unit pace. Starts for the volatile multi-family homes segment surged 39.6% to a 423,000-unit rate.
Groundbreaking for buildings with five or more units hit the highest level since January 2006.
Permits to build homes jumped 8% to a 1.08-million unit pace in April, the highest since June 2008. Economists had expected permits to rise to a 1.01-million unit pace. Compared to April last year, permits were up 3.8%.
Permits for single-family homes rose 0.3% to a 602,000-unit pace.
Single-family homes permits continue to lag groundbreaking, suggesting that single-family starts could decline in the months ahead to bring them in line with permits.
Yesterday a survey showed confidence among single-family home builders slipped to a one-year low in May.
Permits for multi-family homes soared 19.5% to a 4 78,000-unit rate in April. Multi-family permits are running well ahead of starts, which could indicate delays in getting projects started. Permits for buildings with five or more units jumped 21.8% to their highest level since June 2008.
The multi-family segment is being driven by demand for rental units. Builders, however, have complained about rising material costs as well as shortages of lots and skilled labour.