U.S. housing starts fell in February, but permits for future construction jumped to their highest level since October 2008, according to a government report on Tuesday that showed steady improvement in the housing market.
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The Commerce Department said housing starts slipped 1.1 percent to a seasonally adjusted annual rate of 698,000 units. January's starts were revised up to a 706,000-unit pace from a previously reported 699,000 unit rate.
Economists polled by Reuters had forecast housing starts little changed at a 700,000-unit rate. Compared to February last year, residential construction was up 34.7 percent, the biggest year-on-year rise since April 2010.
New building permits surged 5.1 percent to a 717,000-unit pace last month, far exceeding economists' expectations for an advance to a 690,000-unit pace from January's 682,000-unit rate.
Green shoots are starting to emerge in the housing market, but an oversupply of unsold homes, which is depressing prices, remains a major hurdle, even as sales have picked up in recent months as job growth accelerated.
Residential construction is expected to add to economic growth this year for the first time since 2005.
Sentiment among home builders held at a near five-year high in March, a survey showed on Monday, and they were optimistic about sales over the next six months.
Housing starts last month were pulled down by a 9.9 percent drop in the construction of single-family homes - which account for a large portion of the market.
Groundbreaking for multi-family housing projects soared 21.1 percent. This segment is benefiting from rising demand for rental apartments as falling house prices discourage some Americans from owning a home.
Housing starts in the South rose to their highest level since October 2008.
Permits to build single-family homes jumped 4.9 percent to a 472,000-unit pace - the highest since April 2010. Permits for multi-family homes increased 5.6 percent to a 245,000-unit rate.