REPORTING FROM WASHINGTON — New home construction unexpectedly surged in April to its best level in more than seven years as the housing market rebounded strongly after two weak months largely caused by bad weather.
Privately owned housing starts increased 20.2 percent from March to an annual rate of 1.135 million, the Commerce Department said Tuesday.
The level was the best rate since November 2007.
Building permits, an indicator of future construction, also jumped in April in another positive sign for economic growth in the second quarter of the year.
Permits increased 10.1 percent from March to a seasonally adjusted annual rate of 1.143 million. That was the best since June 2008.
Economists had expected starts and permits to bounce back after disappointing figures in February and March.
But the figures were higher than forecast and indicated broader economic growth will improve this spring after a poor first quarter that many economists attributed mostly to severe weather.
The economy expanded at a 0.2 percent annual rate from January through March, but many analysts expect government officials to downgrade the figure to show the economy actually contracted slightly in the first quarter.
“At a stroke, this report demolishes the idea that the economy — outside the oil sector — suffered some sort of real seizure in the first quarter,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said of the housing starts data.
“It didn’t,” he said. “It was just battered badly by a winter nearly as grim as last year.”
Patrick Newport and Stephanie Karol, U.S. economists for IHS Global Insight, said conditions are improving for home building.
“Builders are benefiting from lower wage pressures and cheaper materials,” they said in a research note. “The price of lumber has been dropping like a stone since February.”
The best housing start gains in April were in the Northeast, where weather had been unusually bad the previous two months. New construction rose 85.9 percent in the region, driven by big increases in multi-unit projects.
Starts increased by 39 percent in the West and 27.8 percent in the Midwest, but dropped by 1.8 percent in the South.
In a sign of an improving housing market, Home Depot on Tuesday raised its guidance for its fiscal year, which began Feb. 2, as it reported better than expected earnings for the three months ended May 3.
“We had a stronger than expected start to the year as we experienced a more normal spring across much of the country and continued recovery of the U.S. housing market,” said Chief Executive Craig Menear.
The home improvement giant reported first quarter sales of $20.9 billion, up 6.1 percent from a year earlier.
Given the strong start to the year, Home Depot said it expected sales to increase between 4.2 percent and 4.8 percent this fiscal year.
In February, the company said it expected sales in 2015 to increase between 3.5 percent and 4.7 percent.