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New home construction surges 41%

By Julianne Pepitone, staff reporter

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.

"In the near-term the drop in permits clearly signals falling starts ahead," Shepherdson wrote. To top of page

Index Last Change % Change
Dow 17,084.49 33.74 0.20%
Nasdaq 4,830.47 19.68 0.41%
S&P 500 2,014.89 1.46 0.07%
Treasuries 2.10 -0.01 -0.43%
Data as of 6:52am ET
Company Price Change % Change
Alcoa Inc 10.26 -0.75 -6.81%
Bank of America Corp... 15.58 -0.17 -1.08%
Apple Inc 112.12 2.62 2.39%
EMC Corp 27.86 0.68 2.50%
Freeport-McMoRan Inc... 13.49 0.03 0.22%
Data as of Oct 9


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