New home construction in the US rose 9.8 per cent in February to 1.45 million units, the government said on Thursday. The figures are seasonally adjusted.

The rise in home construction followed a decline in January, when housing starts fell by 2 per cent. New home construction rose for the first time in six months.

The increase was larger than Wall Street had expected. Economists surveyed by the Wall Street Journal expected housing starts to remain at 1.31 million from a preliminary estimate of 1.31 million in January.

In January, housing starts were revised down 2 percent to 1.32 million, compared with a previous decline of 1.31 million.

Permits for new home construction surged 13.8% to 1.52 million in February. Economists had expected building permits to rise to 1.34 million, up from a preliminary estimate of 1.34 million in January.

Key details. the pace of single-family home construction rose 1.1 per cent in February, with condominiums jumping 24.1 per cent.

Single-family home construction in the West led the jump with a 28.5 percent increase. The Midwest and South regions reported a decline in single-family home construction.

Regionally, residential construction rose the most in the Midwest, up 70.3 per cent, and in the West, up 16.8 per cent.

Permits for single-family homes rose 7.6 per cent in February, while permits for construction with at least five units rose 24.3 per cent.

Overall, housing starts were down year-on-year. The annual rate of total housing starts fell from 18.4% the previous year.

The big picture. The better-than-expected housing starts figure was due to a boom in flat construction, and the increase in multi-family units may improve affordability as the US faces a housing deficit.

However, mortgage rates remain volatile, so homebuyers are getting mixed signals from the US economy as well as the housing market.

Despite this, builders remain cautiously optimistic about sales as they are one of the few companies adding to their inventory and due to their ability to offer mortgage rate relief and other incentives.

What are they saying?" Eugenio J. Aleman, chief economist and senior vice president at Raymond James, wrote in a note: "The recent recovery in some measures of the US housing market, while encouraging for the sector and the US economy, is not good news for the Federal Reserve.

He added that the Fed was "banking on a weak housing market to curb rising house prices so that they can contribute to lower inflation".

Analysts at Jefferies warned that "this month's strength is surprising, but it also looks like it could be an idiosyncratic one-off phenomenon."