RPT-WRAPUP 2-U.S. home building rises, foreclosures a threat

(Repeating to additional subscribers)

* Housing starts rise 7.2 percent in March

* Building permits up 11.2 pct, rebound from record lows

* Gains mostly reflect snap back from bad weather
(Adds details throughout, byline, updates markets)

By Lucia Mutikani

WASHINGTON, April 19 (Reuters) - U.S. home building and
permits for future construction rebounded strongly last month
from February's weather-depressed levels, but a glut of housing
on the market will make further gains difficult.

Housing starts rose 7.2 percent to an annual rate of
549,000 units from an upwardly revised 512,000-unit pace in
February, the Commerce Department said on Tuesday.

The rise marked a bounce back after an 18.5 percent drop in
February when severe winter weather restrained activity.

Although the increase beat Wall Street's expectations for a
549,000-unit pace, economists said it did not signal a decisive
shift in construction, which continues to be dragged down by
stiff competition from a flood of foreclosed properties.

"The rebound in housing starts in March does little to hide
the fact that home building activity remains close to rock
bottom," said Paul Dales, a senior U.S. economist at Capital
Economics in Toronto.

"With both the demand and need for new homes still very
low, housing starts aren't going to enjoy a more meaningful
recovery for a few years yet."

Residential construction accounts for about 2.4 percent of
gross domestic product, and the latest data suggest it would do
little, if anything, to lift the economy in the first quarter.
Investment in home building grew at a 3.3 percent annual rate
in the last three months of 2010.

Faced with a poor market, builders have shown little
appetite to break ground on new projects. An index of builder
sentiment in April, released on Monday, slipped a notch with
builders viewing sales conditions now and in the next six
months as unfavorable.
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LIGHT AT END OF TUNNEL?

Housing starts have declined about 76 percent from their
2006 peak of 2.27 million units, but some economists see light
at the end of the tunnel.

"Even though there remains a huge glut of unsold properties
inhibiting construction activity, that glut is diminishing.
There is a relative scarcity of new properties," said Richard
DeKaser, an economist at Parthenon Group in Boston.

"Though used properties ... are super-abundant and are a
very effective competitor for new properties ... some people
put a premium on new homes and at some point that scarcity is
likely to result in improved construction."

According to the National Association of Realtors, new home
prices have been running 45 percent higher than prices for
existing homes. That premium is historically about 15 percent,
and the unusually wide spread indicates previously owned homes
are currently selling well below the cost of construction.

U.S. financial markets were little moved by the data as
investors focused on other issues ranging from solid earnings
from banking giant Goldman Sachs (GS.N) to European debt
worries and concern over the United States' credit outlook.

Groundbreaking for single-family homes rose 7.7 percent
last month, while construction of multifamily units climbed 5.8
percent.

New building permits advanced 11.2 percent to a
594,000-unit pace last month, rebounding from a record low in
February.

The rise in permits reflected a 25.2 percent jump in the
multifamily segment to the highest level since January 2009,
likely reflecting growing demand for rental properties.

Permits to build single-family homes rose 5.7 percent.
(Editing by Neil Stempleman)
(lucia.mutikani@thomsonreuters.com; Tel: 202 898 8315; Reuters
messaging: lucia.mutikani.thomsonreuters.com@reuters.net))