Stop the presses: Housing starts for single-family homes rose 1.1% in February to a seasonally adjusted pace of 357,000 units compared to the previous month, according to numbers released this morning by the Census Bureau.

Overall, builders started 583,000 housing units in February, a 22.2% jump compared to the previous month. That level of activity considerably exceeding the expectations of analysts, who had projected an overall pace of 450,000 housing starts for the month.

Building permits, an important indicator of future housing activity, also soared last month. Total housing starts increased 3% to a seasonally adjusted level of 547,000. Permits for single-family homes leaped 11% to 373,000.

While builders might be celebrating at the news, the increase alarmed analysts such as Michael Rehaut of JP Morgan, who said the single-family permit increase “a negative from a supply standpoint.”

He explained in a written report: “While we believe existing home inventory remains the core supply problem, which remains highly elevated at 3.6 million homes …we believe a rise in new home inventory would only exacerbate the current downturn. Moreover, we believe these elevated inventory levels will continue given our outlook for weak demand to continue well into 2009, driven by rising unemployment, low consumer confidence, still tight credit conditions, and rising delinquency and foreclosure rates.”

Others disagreed. “The increase in single-family permits is unexpected good news,” said Patrick Newport, U.S. economist for research firm IHS Global Insight in Lexington, Mass.

But Newport also cautioned builders against irrational exuberance. “We still believe that housing starts and permits have further to fall because the outlook facing builders continues to deteriorate,” he said in a statement. “Prices of existing homes are dropping at double-digit rates, inventory of unsold homes remains near all-rime highs, and foreclosures are still increasing. If financial markets improve, and banks ramp up lending, the housing market should hit bottom later this year.”

And multifamily projects were responsible for much of February’s starts increase, with month-over-month 82.3% increase in such construction. (Multifamily permits slid 10.8% compared to the previous month.)

Overall, residential construction activity still remains far below last year’s levels. Overall building permits in February are 44.2% below February 2008; single-family permits are down 42.3%. Starts have plunged even lower, with total starts standing 47.3% below the same month last year and single-family starts off 50.6% compared to February 2008.

Alison Rice is senior editor, online, at BUILDER magazine.