The decline in building permits for new home construction in May appeared exclusively in the multi-family unit sector, which is prone to unpredictable shifts. Single-family construction permits, which are more stable and a better indicator of growth, reached their highest level in five years.

An increase in May construction starts and other market indicators are pointing toward a housing industry that will continue to grow this year, despite a slight downturn in building permits.

That monthly dip – permits to start construction on new homes were down 3.1 percent from a downwardly revised April reading, reaching a seasonally adjusted annual rate of 974,000 units in May, below the milestone rate of 1 million units reached the prior month – the rate is still about 21 percent above the same time last year, according to the Commerce Department's June 18 report.

The monthly change in housing starts in May was less ambiguous – the pace rose 6.8 percent to a seasonally adjusted annual rate of 914,000 units. April's starts were revised up, showing an 856,000-unit pace instead of the 853,000 units reported previously. Groundbreaking on single-family homes, the largest segment of the market, rose 0.3 percent to a 599,000-unit pace. Starts for multi-family homes increased 21.6 percent to a 315,000-unit rate.

As lean inventories push up home prices, confidence among consumers and the construction industry alike will also continue to rise. The upswing in prices are bringing more "underwater" homes back onto dry land, and sentiment among homebuilders hit a seven-year high in June, a report showed on Monday, amid optimism over current and future home sales.

Many economists expect starts to top a 1 million-unit pace this year.