A housing construction report indicated higher levels of activity than the range of forecasts, but that had more to do with revisions to the previous month than a rebound in activity. The actual monthly gain was modest.

Housing starts ― new construction of private homes ― gained a 3.6% in June, sending the annual rate of construction to 582,000. The median forecast was just 530,000, but data for May was revised up by 30k.

The gain isn't that large, but a look at the annual figures gives some idea as to why any gain is looked at optimistically: since June 2008, housing starts have fallen 46% from an annual pace of 1.078 million.

In the other half of the report, building permits ― a leading indicator for housing starts ― jumped 8.7% to an annual rate of 563,000 units, suggesting that May’s uptick in starts will be repeated in June.

Single-family housing starts ― a component analysts at IHS Global Insight call “arguably the most informative statistic about the current state of the housing market” ― rose a whopping 14.4% in June to an annual pace of 470,000 units, marking the fourth consecutive increase.

Analyst reactions to the report were positive, with several economists noting that residential real estate could even contribute positively to second quarter GDP.

“The evidence is growing that housing construction has bottomed out and that single-family housing construction is beginning to recover―although, given the volatility from month-to-month in housing starts and building permits, we would like to see the July data before talking too much about recovery versus stabilization,” said analysts from RDQ. 

Similarly, Deutsche Bank’s Joseph LaVorgna called the starts and permits figures “the best evidence that housing has bottomed,” adding that recovery could begin sooner than earlier predictions had assumed.

“We are not revising up our H2 forecast because consumption and inventories, the two primary drivers of recovery, could still turn out to be weak,” he said. “Nonetheless, this housing information is good news for a beleaguered economy.”

However, TD strategist Millan Mulraine characterized the report as “bittersweet.”

Looking at construction alone he conceded the report was good news, but in the larger scheme of things a rebound in construction isn’t necessarily a boon. Excess inventories are already a major problem, Mulraine said, and an uptick in construction only makes that problem worse.

One thing that can't be disputed: Yesterday's 2-point increase in homebuilder confidence looks justified by this data.