Housing recovery to remain sluggish through 2012 (MoneyWatch) Despite a painfully sluggish recovery, the U.S. housing market is beginning to show signs of renewal, with experts cautiously optimistic that the rebound will pick up speed in 2013. The pace of residential construction is accelerating, although not as quickly as economists would like, according to new federal data. The seasonally adjusted annual rate of single-family housing starts rose 3.2 percent in May, to 516,000 units, the biggest hike in construction activity since December 2011. Permit activity for both single- and multi-family homes was up 7.9 percent last month, to 780,000 units. That's the strongest pace since September 2008. However, overall housing starts fell 4.8 percent, to 708,000 units. That entire decrease is occurring on the multi-family side of the market, with single-family starts rising. That's not entirely surprising, considering the volatility in the multi-family market. Foreclosures spike in May Loan scams target U.S. soldiers Economists think select real estate markets around the country will begin to see improvement before a broader national turnaround. And progress is likely to be fitful until the U.S. economy returns to normal growth trajectory. "While there are some signs of optimism including improving construction market fundamentals, the main impediments to a full recovery remain weak overall economic growth and the reluctance of lending institutions to provide financing for construction projects," Kermit Baker, chief economist for the American Institute of Architects, said in an email. Until those change, there will be only modest improvements. Baker also notes that the downturn in home prices during the recession has caused many homeowners to become renters, move in with family, or find roommates. This change in housing choices is reflected in construction numbers, with multi-family construction seeing a bigger uptick than single-family construction in permitting activity in May. Single-family permit activity rose 4 percent, the best pace since May of 2010, and multi-family permits gained 15.3 percent. "The latest data provides evidence of the kind of slow but steady growth that we expect to see in housing production through the end of the year, and shows that housing continues to regain strength regardless of some weakening in other parts of the economy," said David Crowe, chief economist for the National Association of Home Builders, in a statement. Particularly encouraging are the gains in permit issuance posted in both the single-family and multifamily sectors in May, which are indicative of builders' intentions to start new projects in the coming months. Crowe believes that renters will feature more prominently in the housing market in the near term, but he doesn't expect that to become a permanent trend. "We're in a very long cycle of net worth and credit rebuilding," he said. Renters will eventually drift to homeownership, but we're probably four or five years away from that. So what does that mean for the housing sector this year? Even as Europe continues to wrestle with its debt crisis and the global economy slows, Crowe and Baker predict that the recovery will continue -- if slowly -- through 2012. They also expect that trend to gather speed next year. Baker believes we may see double-digit growth in the non-residential construction sector in 2013, which would indicate that banks and businesses feel better about the economy as a whole. Anirban Basu, chief economist for Associated Builders and Contractors, is less optimistic. Access to credit continues to be a problem for both consumers and for the construction industry, while energy costs are unusually volatile given the weak economy, he recently noted.