There was good news and bad news about the state of the housing industry recently. New residential construction surged 20 percent in April, the highest level in housing construction since November 2007. At the same time, experts are cautioning that sales of both new and existing homes for the year may be lower than anticipated, due to weaker than expected buyer activity. The problem is not a lack of interest, but a lack of confidence in the economy.

New construction starts and requests for building permits rose in April for both single-family homes and multifamily buildings, according to data released by the U.S. Department of Commerce. Privately owned construction starts were up 20.2 percent over revised estimates for March and 9.2 percent over April 2014. Single-family starts increased 16.7 percent, and multifamily starts rose 27.2 percent. Building permit issuance rose 10.1 percent from March and 6.4 percent over April 2014.

The unexpected jump in new starts and permits is welcome news for the housing industry and the economy as a whole. Reuters reported that the S&P homebuilding index rose 0.60 percent following the government announcement. Economists embraced the news as a sign that the long-awaited housing recovery had finally arrived, predicting that the industry would realize substantial growth in the second quarter, and would give a much-needed boost to the economy.

"Builders have been unusually timid in ramping up their operations (can you blame them?), but I believe, based predominantly on reports from the industry, that 2015 will be the year that they finally begin the return to normalcy," Stephen Stanley, chief economist at Amherst Pierpont Securities, commented.

Other areas of the economy, however, are not faring so well. Experts had predicted that falling gasoline prices and annual tax refunds would lift retail sales, but that has not occurred. Instead, consumers are choosing to pay off debt or rebuild their nest eggs.

Employment continues to rise, but not enough to generate significant increases in wages. The U.S. economy grew just 0.2 percent in the first quarter, according to the Commerce Department, compared to a predicted 2.3 percent. Consumer spending is down, and consumer confidence dropped within the past month. A recent poll by the Gallup organization found that 86 percent of Americans say the economy will be the most important issue in next year's presidential elections.

Concern over the economy has put a bit of a damper on the housing market. The National Association of Home Builders reports its builder confidence index dropped two points in May, noting that builders have seen a slowdown in new buyer interest.

"Consumers are exhibiting caution," NAHB Chief Economist David Crowe said, "and want to be on more stable financial footing before purchasing a home."

The National Association of Realtors forecasts sales of existing homes "to finish the year at their highest pace since 2006." But the group also cautioned that "accelerating price growth and rising mortgage rates have the potential to slow sales."

Lawrence Yun, chief economist for the NAR, said sales of existing homes are measurably higher than a year ago, and that more buyers entered the market in March as the spring buying season got underway.

"The demand for buying is especially strong in parts of the country where jobs gains and economic activity have outpaced the rest of the nation," Yun said.

At present, signals in the industry remain mixed. Activity is higher than it was a year ago for both new construction and existing home sales. Surveys indicate that consumers plan to buy a home or upgrade to a better home in the near future. Business has also picked up for residential architects.

The wild card is whether the economy will improve enough to reassure consumers and make home ownership more affordable for more of them.