Housing starts rose 3.5% in May to a seasonally adjusted annual rate of 560,000 units, retracing almost half of April's steep decline, according to figures released by the Commerce Department.
Compared to the same month a year ago, starts fell 3.4%. The reading reflects both single-family and multifamily construction.
Multifamily starts rose to 134,000 units in May, a 9% sequential gain, and a 24% jump from May 2010.
Meanwhile, the outlook from builders continues to be bleak. An index from the National Association of Home Builders that measures the business sentiment of its members fell three points in June to 13, the lowest level in nine months.
"Builders are being squeezed by the continuing weakness in existing-home prices — against which they must compete — as well as rising material costs," said NAHB chairman Bob Nielsen, a home builder from Reno, Nev. "In addition to the ongoing impacts of distressed property sales on home prices, appraisal values and consumer confidence, rising costs for materials such as roofing, copper, wallboard, vinyl siding and other components have made it extremely difficult to construct a new home and sell it at a price that covers the costs."
New building permits unexpectedly rebounded 8.7% to a 612,000-unit pace last month, the highest level since December.
