Wall Street Journal
(4/16/2013 8:39 AM, Alan Zibel and Jeffrey Sparshott)

WASHINGTON—Construction of new homes leapt last month to the highest level since before the financial crisis, a sign the U.S. housing market's recovery will continue to lift the economy.

Overall housing starts rose 7% in March to a seasonally adjusted annual rate of 1.04 million, the Commerce Department said Tuesday.

The month's figures were driven by big jump in construction of multifamily homes, a volatile part of the industry. Construction of homes with at least five units rose about 27%, while single-family construction fell by 4.8% on a monthly basis.

The overall figures were the strongest since June 2008. Economists surveyed by Dow Jones Newswires had forecast housing starts would rise 1.7% to a rate of 933,000. February's figures were revised sharply upward to a rate of 968,000.

Meanwhile, the number of new building permits, an indication of future construction, fell 3.9% to an annualized rate of 902,000 in March. That was below economists' estimates for a rate of 945,000.

Economists believe improvements in the housing market will be a bright spot for the tepid economic recovery this year. Investments in residential projects and home improvements have contributed to overall economic growth for seven consecutive quarters.

Still, builders' ability to get construction loans and higher costs for building materials could slow construction in the coming months. On Monday, the National Association of Home Builders said its members' confidence fell in April for the third straight month and was at its lowest level since October.

The government data showed new home building rose in three out of our U.S. regions last month. Construction rose 10.9% in the South, 9.6% in the Midwest and 2.7% in the West, but fell 5.8% in the Northeast.

Actual housing starts, which are calculated without seasonal adjustments, increased to 85,800 in March from a upwardly revised 66,300 for the prior month. Lumber and commodities markets watch those numbers closely to gauge demand.