U.S. housing starts and permits for future home construction rose more than expected in March, snapping back from the prior month's winter depressed levels, government data showed on Tuesday.

KEY POINTS:

* The Commerce Department said housing starts rose 7.2 percent to a seasonally adjusted annual rate of 549,000 units. * February's starts were revised up to a 512,000-unit pace from the previously reported rate of 479,000 units. * Economists polled by Reuters had forecast housing starts rising to a 520,000-unit rate. Compared to March last year, residential construction was down 13.4 percent.

COMMENTS:

SIREEN HARAJLI, ECONOMIST, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK, NEW YORK

The figures were slightly above expectations. However it's mainly a rebound from previous month's decline. We still think the housing market is very weak, and the high inventory is still depressing sales and prices.

We hope to see some signs of improvement toward the end of the year, but we won't see substantial improvement until 2012.

ALEX HODER, ECONOMIC ANALYST, FTN FINANCIAL, NEW YORK

The problem is the numbers are so low to begin with that you see these huge month-to-month percentage changes but the number is close to relatively what they've been.

This time last year was right after the first-time home buyers tax credit so you're comparing these numbers to a high level of volatility.

It's just another data point drifting sideways.

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

The seasonally annualized rate of 549,000 houses started in March represents a 7.2 percent increase from February's 512k (originally 479k), but is still 12.6 percent below January's spike to 628k. Although small in magnitude, any gain will suffice given February permits had sank to what was originally thought to be a record low of 517k.

Therefore the slightest increase in volume is good news. Permits (revised last month to a smaller decline of 534k from 563k) also rebounded in March, rising to 594,000 permits issued. Both single-family homes and multi-units supported permits and starts, which are both down a little over 13% over the past twelve months.

Yet another housing report indicating prevalent obstacles in the sector preventing advancements on which to meaningfully comment. May's report (reflecting April's number) will reflect the same.

MARKET REACTION:

STOCKS: U.S. stock index futures steady at higher levels.

BONDS: U.S. bond prices steady at lower levels.

FOREX: The dollar steady at lower levels versus the euro.