U.S. new home starts jump

The rate of new home construction in the United States rose more than expected in April, the Commerce Department reported Tuesday.

The number of new homes and apartments rose 5.8 per cent to a seasonally adjusted annual rate of 672,000, its highest result since October 2008. The increase was from an upwardly revisedlevel in March of 635,000.

Analysts surveyed by Thomson Reuters had expected April construction to rise more modestly at a rate of 650,000.

But new building permits a measure of building intentions fell sharply, signalling the industry's rebound could be short-lived.

Construction picked upas builders met increased demand from buyers taking advantage of federal tax incentives, but buyers are now scaling back their plans.

Building permits sank 11.5 per cent to an annual rate of 606,000, the lowest since October 2009, the Commerce Department said. Analysts were expecting a slight dip to a rate of 680,000.

U.S. home sales have been helped this year by low mortgage rates and two government tax credits $8,000 for new buyers and $6,500 for current owners who buy and move into another property.

Borrowers had to have a signed offer by April 30 and to close the deal by the end of June to qualify.

Sales expected to slow

With the deadline now past, many experts anticipate home sales will slow in the second half of this year. In addition, high unemployment and tight standards for mortgage lending continue to keep many buyers on the sidelines.

"The hardest-hit segment of the U.S. economy over the past couple of years has arguably been the housing market," Todd Hirsch, senior economist with Edmonton-based ATB Financial said in a commentary.

"Indeed, it was problems in the residential market including a collapse in both price and construction activity that was largely responsible for igniting the whole financial crisis in 2008," he said.

The message from the housing starts data, said Hirsch,is that the U.S. economy improved in April, "but the American housing market is not out of the woods yet."