New US home starts surge in June

There are signs confidence may be returning to the building sector

The construction of new homes in the US rose 3.6% between May and June to the highest level in seven months, official figures have shown.

This is the second month in a row that housing starts have risen following a post-war low in April.

Compared with the same month a year ago, however, June starts were down 46%, the Commerce Department said.

The number of single family homes being built jumped 14.4% in June, the biggest jump in over four years.

'Genuine surprise'

The number of new homes built totalled 582,000, many more than analysts had expected.

Figures for May were also revised upwards, from 532,000 to 562,000.

It is too soon to call a bottom to the housing market in the US The Centre for Economics and Business Research

"These figures look like a genuine upward surprise, and support our view that housing construction activity is bottoming out," said Dean Maki at Barclays Capital.

For the April to June months, Mr Maki added that single family starts saw the biggest quarterly increase since the early 1990s.

The number of permits to break ground - considered an indicator of confidence in the building sector - climbed to its highest level since December last year.

Completions down

Some analysts, however, urged caution in the wake of the stronger-than-expected data.

"It is too soon to call a bottom to the housing market in the US," said the Centre for Economics and Business Research.

William O'Donnell, head treasury strategist at RBS Securities, argued that: "This is another piece of data for those seeing the recession ending soon."

"But housing starts are still within the range of the past six months and the completion rate is still down," he said.