The lion's share of the month-to-month gain came from a 102.6 percent increase in residential building starts in the Northeast, primarily a surge in multi-family unit.

Most of the increase was in metro New York, where a weak dollar favoring foreign buyers and investors "seems to be powering a surge in New York area residential activity," said Joel L. Naroff, chief economist of Commerce Bancorp in Cherry Hill.

"That obviously skewed the numbers as outside the Northeast, activity remained weak," he said.

How could one city affect the numbers so much?

"New building codes enacted by New York City accounted for the big jump in permits and starts," said Patrick Newport, housing economist at Global Insight in Lexington, Mass. "Excluding the Northeast, permits were flat, and starts fell 4 percent."

New York saw a rush to get permits through before a new, stricter building code took effect July 1.

Northeast permits increased by 12,000 (with most of this in New York City), Newport said. This number was annualized (multiplied by 12), and added 126,000 to the monthly total.

Starts in June were 9.1 percent above May, but 26.9 percent below June 2007. Single-family housing starts in June were 5.3 percent below May, and fell 9.2 percent in the Northeast.

Residential building permits in June were 11.6 percent above May, but 23.9 percent below June 2007. Single-family authorizations in June were 3.5 percent below May.

The housing construction outlook has worsened. Fewer regional lenders, concerned about the health of loans they have, are eager to provide financing for home construction, Newport said.

Problems at Fannie Mae and Freddie Mac already were creating trouble for builders before recent events.

Fannie Mae "dropped out of the condo market last October, and that has played havoc with condo sales," said Marshal Granor, principal in Granor Price Homes in Horsham. "Every lender has their own review process – so condo sales are converting to FHA project approvals. We are still waiting for ours."

The number of unsold homes on the market is at or near a record high, and reducing inventories will require that housing prices drop further and that builders refrain from putting up new homes, said Newport, who expects starts to drop an additional 15 percent from current levels.

Naroff sees a longer-term trend in these numbers.

"As the baby-boomers retire, multifamily dwellings may be more of the home of choice than McMansions," he said. "So let's not discount the improvement in home construction even if the single-family sector has not yet turned and the Northeast was the only source of strength."