Residential construction activity rose significantly in May as housing starts overall jumped 17.2% from April to a seasonally adjusted annual rate of 532,000, the Commerce Department reported Tuesday morning. The number eclipsed Wall Street estimates for a rate of 485,000 and was the third consecutive month of increase.

Single-family starts rose as well, albeit by a less robust margin, ending the month up 7.5% to a seasonally adjusted annual rate of 401,000. That was still 41% below the May 2008 rate of 601,000, and overall starts remained 45.2% below the May 2008's 971,000.

The news was greeted by Wall Street traders with buy orders, which sent the public builder stocks up in early trading. Standard Pacific (NYSE:SPF), Hovnanian (NYSE:HOV) and Beazer (NYSE:BZH), which suffered a selloff on Monday, were up in the 6% to 8% range in the first minutes of trading Tuesday.

Permits, a longer-term indicator, also rose, but not by nearly as much.Permits for all housing types were up 4% to an annual rate of 518,000, 47% below a year ago. However, single family permits were up 7.9% from April to a rate of 408,000. That was down 35.1% from May last year.

Overall starts were driven by a spurt of multifamily construction in the West region, which posted a 26.6% increase with only an 8.6% in single family. The Northeast, much of which has been suffering wet weather all spring, was up only 2%, with single family down 12.5%. All starts were up 11.1% in the Midwest, with single-family up 9.4%. The South was up 16.8% overall and 10.6% for single family.

Permits presented a brighter picture for single-family construction, with all regions posting increases, led by the Midwest and the Northeast with gains of 16.1% and 13.5% respectively. Single family permits rose 4.5% in the South and 7.5% in the West.

For all housing types, permits were up 5.7% in the Northeast, 8.9% in the Midwest, 2.3% in the South and 3.8% in the West.