A separate report on Friday showed consumer sentiment falling in May
on worries over income growth, tempering the housing data's upbeat
signal on the economy.
Groundbreaking for homes surged 13.2 percent to a seasonally
adjusted annual pace of 1.07 million units, the highest since
November 2013, the Commerce Department said. The increase, which
marked a rebound from a cold winter that had weighed on activity,
was driven by starts on multi-family housing.
A combination of rising mortgage rates and prices, and slow growing
earnings, has pushed homeownership out of the reach of many
Americans, helping fuel demand for rental and condo units.
"The current stock of apartments is insufficient to satisfy demand,
sending rents soaring across the country and making multi-family
units an attractive investment for developers and landlords," said
Stephanie Karol, an economist at IHS Global Insight in Lexington,
Groundbreaking for single-family homes, the largest part of the
market, rose 0.8 percent, while starts for the volatile multi-family
homes segment surged 39.6 percent.
U.S. Treasury debt yields rose on the data, while the dollar was
little changed against a basket of currencies. U.S. stocks traded
The housing market contracted for a second consecutive quarter in
the first three months of 2014, and is expected to add little if
anything to growth this year. Federal Reserve Chair Janet Yellen
said earlier this month that there was a risk a protracted housing
slowdown could undermine the economy.
A range of data has shown the economy bouncing back from a deep
winter chill. A quarterly survey released by the Philadelphia
Federal Reserve Bank on Friday showed forecasters had bumped up
their expectations for second-quarter growth to a 3.3 percent annual
pace from 3.0 percent previously.
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But questions remain over how lasting the current strength will
prove, and the report on consumer confidence offered a cautionary
note. The Thomson Reuters/University of Michigan's consumer
sentiment index fell to 81.8 from 84.1 in April.
BUILDING PERMITS OFFER MIXED SIGNALS
The housing starts report suggested building activity would likely
continue to rise for some time as permits to build homes jumped 8.0
percent to a 1.08-million unit pace in April, the highest since June
Permits for single-family homes, however, rose just 0.3 percent and
continue to lag groundbreaking, suggesting single-family starts
could decline in the months ahead. A survey on Thursday showed
confidence among single-family home builders slipped to a one-year
low in May.
In contrast, permits for multi-family housing soared 19.5 percent.
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 were the highest since June 2008.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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