US housing starts surged in September after falling for two months, but a drop in building permits suggested slower future growth, according to the latest official data.

Housing starts jumped 6.5 per cent to an annual rate of 1.206 million units in September, the Commerce Department has reported.

Starts were up 17.5 per cent from their September 2014 pace, and up 12.0 per cent in the year to date.

The increase was led by new construction of multi-family units, a sector that can be volatile. Multi-family starts jumped 17.0 per cent in September, while starts on single-family homes, which account for two thirds of the US housing market, edged up 0.3 per cent.

Building permits, a sign of future home building activity, dropped 5.0 per cent in September. Year-over-year, building permits were up 4.7 per cent. In the first nine months of the year, they were up 13.0 per cent.

“Residential construction continues at a steady pace,” said Andres Carbacho-Burgos of Moody’s Analytics.

But given the September drop in building permits, the analyst said, construction would likely slow in the coming months, as building permits were moving at a slower year-over-year pace compared to starts.