Builders broke ground on fewer homes in May, due mostly to plummeting apartment construction, but requested the most permits since September 2008.
Overall housing starts last month dropped 4.8% to a seasonally adjusted annual rate of 708,000, but that's compared with April's 744,000 figure, which was revised up.
Compared with May 2011, new construction is up 28.5%, according to the Commerce Department report.
Initial work on multi-family housing, an erratic gauge which plunged 21.3% last month, was a drag on the overall measure. Housing starts for single-family homes rose 3.2% in their third straight monthly increase.
Builders also seem to be looking forward to the next 12 months, requesting the most permits in more than three years.
Permits were at a seasonally adjusted rate of 780,000, a 7.9% increase from April and 25% above last May.
The new data raises the question du jour: Is the housing market making a gradual recovery?
Both the housing starts and building permits measures are at about half the 1.5-million level usually considered healthy. A report Monday found home-builder confidence still weak, despite being at a five-year high.