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Home Construction Permits Soared in May; Housing Industry Fortunes Improving

WASHINGTON — Permits for home construction in the United States surged to a nearly eight-year high in May, suggesting a building up of momentum in housing and the broader economy after a dismal performance at the start of the year.

While housing starts fell last month, that followed a robust gain in April, and groundbreaking remained at levels consistent with a strengthening housing market.

The improving fortunes for housing, shown in rising home prices and sales, will probably be acknowledged by Federal Reserve officials, who started a two-day policy meeting on Tuesday. Policy makers have repeatedly singled out housing as a weak spot in the economy.

“Residential construction has been the laggard in this recovery, and the moonshot surge in new permits today means the final piece of the recovery puzzle is now falling into place,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

Building permits jumped 11.8 percent to a seasonally adjusted annual pace of 1.28 million units, the highest since August 2007, the Commerce Department said. It was the second straight month of increases. Permits have been above a one million-unit pace since July.

Groundbreaking dropped 11.1 percent to a rate of 1.04 million units. Though that partly reversed the prior month’s large gain, April starts were revised up to a 1.17 million-unit rate, the highest since November 2007.

The Commerce Department report came on the heels of solid reports on retail sales, consumer confidence and employment that have suggested the economy was rebounding from the first quarter’s soft patch, when gross domestic product contracted.

Home building has regained ground lost during a harsh winter and there are signs activity will accelerate this year as tightening labor market conditions spur stronger wage gains and encourage young adults to establish their own households.

Economists anticipate that the housing market will strengthen enough to take up some of the slack from the struggling manufacturing sector and support economic growth.

Building permits for single-family homes, which account for the largest share of the market, increased 2.6 percent to their highest level since December. Building permits for the volatile multifamily segment soared 24.9 percent.

Permits for buildings with five units or more increased to their highest level since January 1990. The multifamily sector is being driven by demand for rental accommodation as more people move away from homeownership.

Permits in the Northeast vaulted to their highest level since March 1987 and were at a near one-year high in the Midwest. They fell, however, in the South and West.

Groundbreaking for single-family homes dropped 5.4 percent to a 680,000-unit pace. Multifamily starts tumbled 20.2 percent to a 356,000-unit rate.

Groundbreaking fell in all four regions, declining a steep 26.5 percent in the Northeast after April’s spectacular gains. Starts in the South, where most of the home building takes place, dropped 5 percent.

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