US builders broke ground on homes last month at a seasonally adjusted annual rate of 1.04 million, the highest level since June 2008.
The gain, driven by a surge in apartment construction, showed continued strength in the housing market at the start of the spring buying season.
The overall pace of building rose 7% from February to March, the Commerce Department said today.
Apartment construction, which tends to fluctuate sharply from month to month, led the surge as it jumped 31% to an annual rate of 392,000, the fastest pace since January 2006.
By contrast, single-family home building, which makes up nearly two-thirds of the market, fell 4.8% to an annual rate of 619,000. That was down from February's pace of 650,000, the fastest since May 2008. The government said February's pace was a sharp 5.2% higher than it had previously estimated.
Applications for building permits, a gauge of future construction, declined 3.9% to an annual rate of 902,000. It was down from February's rate of 939,000, which was also nearly a five-year high.
Steady job growth, near record-low mortgage rates and rising home values have encouraged more people in the US to buy property.
In response to higher demand and a low supply of available homes for sale, builders have stepped up construction. March's pace of homes started was nearly 46% higher than in the same month in 2012.
Housing construction fell 5.8% in the Northeast but gained in the rest of the country, led by a 10.9% rise in the South. It rose 9.6% in the Midwest and 2.7% in the West.
The National Association of Home Builders/Wells Fargo April survey released yesterday showed that builders are concerned that limited land and rising costs for building materials and labor could slow sales in the short term. That led to a third monthly drop in confidence in a row.
Still, the builders' outlook for sales over the next six months climbed to the highest level in more than six years, suggesting that the obstacles could be temporary. And construction firms have stepped up hiring in recent months. They added 18,000 jobs in March and 169,000 since September, according to the Labor Department.
Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the homebuilders.
