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In this Feb. 26, 2018, file photo, work continues on a new development in Fair Lawn, N.J.Seth Wenig/The Associated Press

U.S. home building increased more than expected in March amid a rebound in the construction of multi-family housing units, but weakness in the single-family segment suggested the housing market was slowing.

Housing starts rose 1.9 per cent to a seasonally adjusted annual rate of 1.319 million units, the Commerce Department said on Tuesday. Data for February was revised up to show groundbreaking declining to a 1.295 million-unit pace instead of the previously reported 1.236 million units.

Economists polled by Reuters had forecast housing starts rising to a pace of 1.262 million units last month. Permits for future home building rose 2.5 per cent to a rate of 1.354 million units in March.

U.S. financial markets were little moved by the data.

Despite the rebound in home building last month, activity appears to be slowing. Single-family home building, which accounts for the largest share of the housing market, fell 3.7 per cent to a rate of 867,000 units in March.

A survey on Monday showed confidence among home builders fell in April for a fourth straight month. Builders complained about a lack of buildable lots and increasing construction material costs. According to the survey, tariffs imposed by the Trump administration on Canadian lumber and other imported products were “pushing up prices and hurting housing affordability.”

Confronted with these supply constraints, home building will probably not increase significantly to eradicate an acute shortage of houses on the market, which is pushing up prices and sidelining some first-time home buyers.

Demand for housing is being driven by a robust labour market, which is underpinning the economy. Despite jobs market strength, wage inflation has remained moderate.

Single-family home construction fell in the Northeast, South and West, but rose in the Midwest. Permits to build single-family homes dropped 5.5 per cent in March to an 840,000 unit-pace, the lowest level since September 2017.

With permits lagging starts, single-family home construction could slow further.

Starts for the volatile multi-family housing segment surged 14.4 per cent to a rate of 452,000 units in March. Permits for the construction of multi-family homes dropped jumped 19 per cent to a 514,000 unit-pace.

The outlook for housing inventory was mixed. Housing completions fell 5.1 per cent to 1.217 million units last month, with single-family units dropping 4.7 per cent. But the stock of housing under construction rose 0.3 per cent to 1.125 million, the highest level since July 2007.

Single-family units under construction climbed 0.2 per cent to the highest level since June 2008.

Realtors estimate that the housing starts and completions rates need to be in a range of 1.5 million to 1.6 million units per month to plug the inventory gap.

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