WASHINGTON - U.S. housing starts and permits for future home construction rose more than expected in March, snapping back from the prior month's winter weather depressed levels, government data showed on Tuesday.
The Commerce Department said housing starts rose 7.2 percent to a seasonally adjusted annual rate of 549,000 units. February's starts were revised up to a 512,000-unit pace from the previously reported rate of 479,000 units.
Economists polled by Reuters had forecast housing starts rising to a 520,000-unit rate. Compared to March last year, residential construction was down 13.4 percent.
Still, the bounce back in residential construction does not signal recovery as an over- supply of homes continues to discourage builders from embarking on new projects.
"It's mainly a rebound from previous month's decline. We still think the housing market is very weak, and the high inventory is still depressing sales and prices," said Sireen Harajli, an economist at Credit Agricole Corporate & Investment Bank in New York.
"We hope to see some signs of improvement toward the end of the year, but we won't see substantial improvement until 2012."
U.S. stock index futures were steady at higher levels, while government debt prices were steady at lower levels. The dollar held at lower levels versus the euro.
Home builders' sentiment slipped a notch in April, the National Association of Home Builders said on Monday, with builders viewing sales conditions now and in the next six months as unfavorable.
Residential construction was likely a drag on economic growth in the first quarter after making a modest contribution in the last three months of 2010. Home building accounts for about 2.4 percent of gross domestic product.
Groundbreaking last month was lifted by a 5.8 percent rise in volatile multifamily homes. Single-family home construction increased 7.7 percent.
New building permits advanced 11.2 percent to a 594,000-unit pace last month, rebounding from February's record low 534,000 units. Economist had expected overall building permits to rise to a 540,000-unit pace in March.
Permits were propped up last month by a 25.2 percent jump in the multifamily segment. Permits to construct buildings with five or more units rose to their highest level since January 2009 -- likely reflecting growing demand for rental properties.
Permits to build single-family homes rose 5.7 percent. However, new home completions dropped 14.2 percent to a record low 509,000 units in March.
(Reporting by Lucia Mutikani, editing by Neil Stempleman)
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