U.S. builders broke ground in March on homes at a seasonally adjusted rate of 1.04 million, the fastest since June 2008. The gain was driven by a surge in apartment construction and showed continued strength in the housing market at the start of the spring-buying season.
The Commerce Department says builders increased their construction pace 7 percent in March from February.
Volatile apartment construction jumped 31.1 percent to a seasonally adjusted rate of 392,000 - the fastest pace since January 2006.
Single-family home construction, which represents nearly two-thirds of the market, fell 4.8 percent to a seasonally adjusted 619,000. That was down from February's pace of 650,000, which was the fastest pace since May 2008.
Applications for building permits, considered a good barometer of future construction, declined 3.9 percent to an annual rate of 902,000, down from February's rate of 939,000 - also nearly a five-year high.
Paul Ashworth, chief U.S. economist at Capital Economics, called the strong housing data "obviously good news."
But he cautioned that the March surge was due to a big jump in volatile apartment construction and it was likely that construction activity would drop in April.
Steady job growth, near record-low mortgage rates and rising home values have encouraged more people to buy. In response to higher demand and a low supply of available homes for sale, builders have stepped up construction.
March's pace of homes started was nearly 46 percent higher than the same month in 2012.
Housing construction fell 5.8 percent in the Northeast but showed gains in the rest of the country led by a 10.9 percent rise in the South. Housing construction was up 9.6 percent in the Midwest and 2.7 percent in the West.