Construction of new homes increased by the biggest percentage in more than two years last month, a rare spot of good news amid the worst...

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WASHINGTON — Construction of new homes increased by the biggest percentage in more than two years last month, a rare spot of good news amid the worst downturn in housing in more than two decades.

Analysts, however, played down the increase, noting that all the strength came from the volatile apartment sector.

They said the painful housing slump is far from over as a record flood of foreclosures continues to add to the sizable stockpile of unsold homes.

The Commerce Department reported Friday that housing construction rose by 8.2 percent last month to a seasonally adjusted annual rate of 1.03 million units.

While apartment construction rose by 36 percent, building in the much larger single-family sector of the market fell by 1.7 percent, the 12th consecutive monthly decline, pushing single-family activity down to a 16-year low.

“It is definitely too early to uncork the champagne on the long and winding road to more healthy housing-market conditions,” said Brian Bethune, an economist at Global Insight.

He said he did not expect housing activity to stabilize until the end of this year.

A second report Friday showed that consumer confidence, as measured by a University of Michigan/Reuters survey, fell to a 28-year low of 59.5 in a preliminary reading for this month, down from 62.6 last month.

The drop was blamed, in part, on rising concerns about higher gas and food prices.

Concerns about falling consumer confidence and another spike in oil prices, to a new trading record of $127.82 a barrel, dampened investors’ moods on Friday.

Applications for building permits, considered a good sign of future activity, recorded an increase last month, rising by 4.9 percent to 978,000 units.

It was the first gain in permits in five months but it still left permits 20 percent below where they were a year ago.

Economists said housing construction will remain under pressure until builders have more success in reducing a huge backlog of unsold homes, a challenge amid the current economic weakness.

“The demand for new homes still is quite weak, the overhang of vacant housing units is at record proportions, consumer sentiment continues to fall and the economy has been losing jobs since the end of last year,” said David Seiders, chief economist at the National Association of Home Builders.

He said the economic fundamentals point to continued weakness in the single-family market for the rest of this year.

The housing report showed that construction activity was up in most regions of the country last month, rising by 24.4 percent in the Midwest, 18.5 percent in the West and 3.6 percent in the South. However, construction fell by 12.7 percent in the Northeast.

Even with the improvement last month, housing construction nationwide was 30.6 percent below the level of activity a year ago.