NEW YORK (CNNMoney.com) -- New home construction skyrocketed 40.9% in April compared to last year, according to a government report released Tuesday.
Housing starts increased to a seasonally-adjusted annual rate of 672,000 last month, the Commerce Department said. That was a 5.8% rise over March 2010.
Economists were expecting housing starts to jump to 655,000.
New construction of single-family homes, the key sector of the housing market, rose 10.2% over the month to an annual rate of 593,000.
New construction of multi-family homes -- buildings with 5 or more units -- was 68,000.
April was the last month in which sales to first-time home buyers could qualify for a federal tax credit of up to $8,000. Earlier this year lawmakers extended the deadline through April 30 and added a new credit of up to $6,500 for some existing home owners who move.
"The increase in demand prompted by the tax credit has lifted construction," wrote Ian Shepherdson, economist at High Frequency Economics, in a research note.
"But the expiration of the credit ... has made homebuilders wary about continuing to add new homes during the summer," he said.
Building permits: That's probably why applications for building permits, a gauge of future construction activity, sank in April. Permits fell to a seasonally adjusted annual rate of 606,000 last month, down 11.5% from a revised 685,000 in March.
Economists were expecting 680,000 permits. But despite this month's sharp drop, permits were still up 15.9% from April 2009.
Google Cardboard has a new design and has made new tools for capturing virtual reality video. More
Disgraced former Lehman CEO Dick Fuld is trying to make a comeback on Wall Street. More
A federal judge must decide between two starkly different portrayals of 31-year-old Ross Ulbricht, who is facing sentencing for his role in founding Silk Road. More
A generous patron left a $2,000 tip earlier this week at a D.C. restaurant. More