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Multi-unit buildings under construction are seen in Alexandria, Virginia February 16, 2012. (KEVIN LAMARQUE/REUTERS)
Multi-unit buildings under construction are seen in Alexandria, Virginia February 16, 2012. (KEVIN LAMARQUE/REUTERS)

U.S. housing starts fall, new permits surge Add to ...

Groundbreaking on U.S. homes fell unexpectedly in March but permits for future construction rose to their highest level in 3-1/2 years, giving a mixed message for one of the economy’s weaker sectors.

Housing starts slipped 5.8 per cent to a seasonally adjusted annual rate of 654,000 units, the Commerce Department said on Tuesday.

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The long-moribund U.S. housing sector has showed signs of an incipient recovery in recent months, and home building could add to economic growth this year for the first time since 2005.

Despite the drop in starts, the data suggests housing construction could still add to gross domestic product during the first quarter, said Millan Mulraine, a macro strategist at TD Securities.

But an oversupply of unsold homes is depressing prices, creating a big hurdle for the sector, said Gregory Miller, an economist at Suntrust Banks in Atlanta.

“It’s going to be rocky for a while,” Mr. Miller said, adding the data pointed at best to a tentative recovery.

Some analysts speculated that a mild winter in the United States led home builders to start new projects ahead of schedule, and that March’s decline amounted to a payback.

“Weather was so mild earlier in the year we might have pulled some of the starts forward,” said Mark Foster, who helps manage $500-million at Kirr Marbach & Co in Columbus, Ind.

“But the trend looks good, it feels like the housing market is trying to form a bottom.”

February’s starts were revised down to a 694,000-unit pace from a previously reported 698,000 unit rate.

Economists polled by Reuters had forecast housing starts little changed at a 705,000-unit rate.

U.S. stock futures pared gains after the data was published, while prices on U.S. government debt trimmed losses.

March’s decline in housing starts was the biggest percentage drop since April of last year, although most of the fall was in the volatile multiunit category, which declined 16.9 per cent.

Starts for single-family homes eased 0.2 per cent.

And brightening the report’s message on the economy, new permits for home construction surged.

Permits rose 4.5 per cent to a 747,000-unit pace last month, the highest since September 2008 and beating economists’ expectations for a 710,000-unit pace.

“The rise in permits kind of offsets the disappointing data,” said Omer Esiner, a market analyst at Commonwealth Foreign Exchange in Washington.

Sentiment among home builders ebbed in April for the first time in seven months, a survey showed

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