Construction of new US homes plunged in April but new building permits soared, official data showed Thursday pointing to continued recovery in the housing sector.
Housing starts plummeted 16.5 percent from March to an annual rate of 853,000, according to seasonally adjusted Labor Department figures.
The plunge came after two months of gains, including March's surge to more than one million units. The drop was steeper than the 970,000 rate expected by analysts.
The typically volatile multiple-family sector led the decline, with starts diving 37.8 percent. Single-family housing starts fell 2.1 percent.
Year-on-year, starts were up 13.1 percent.
New building permits for single and multi-family housing, a sign of potential future construction activity, surged 14.3 percent from March to an annual rate of 1,017,000.
Permits were up 35.8 percent from a year earlier.
Analysts said the trend in housing construction was still upward.
"Stirred by volatile multi-unit starts, housing starts are experiencing an adjustment after two months of solid gains," said Mei Li of FTN Financial.
"The rise in building permits suggest the starts drop represents a temporary setback."
With mortgage interest rates near historic lows, an improving economy and tight inventory on the housing market, home builders are growing more confident, according to a survey released Wednesday.
The National Association of Home Builders/Wells Fargo housing market index gained three points to a 44 reading for May.
"Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies," NAHB Chairman Rick Judson said.