Groundbreaking surged 4.8 percent to a seasonally adjusted annual pace of 1.19 million units, the Commerce Department said on Tuesday. Starts for April and May were revised lower, taking some shine off the report.

Economists polled by Reuters had forecast housing starts rising to a 1.17 million-unit pace last month.

Housing starts in the second quarter were a touch higher than the average for the first three months of the year, suggesting that residential construction was probably a small boost to gross domestic product in the second quarter.

Still, the report added to data on employment, industrial production and retail sales in suggesting the economy gained speed in the second quarter after growth sputtered early in the year.

The Atlanta Federal Reserve is currently forecasting GDP rising at a 2.4 percent annualized rate in the second quarter. The economy grew at a 1.1 percent rate in the January-March period.

The dollar rose to a four-month high against a basket of currencies after the report, while prices for U.S. government bonds pared gains. U.S. stock futures were mixed.

The housing market is being supported by a strengthening labor market and demand for rental accommodation, but homebuilding is being constrained by labor and land shortages.

A survey of homebuilders published on Monday showed scattered softness in some markets, with builders citing regulatory challenges as well as shortages of lots and labor.

Groundbreaking on single-family homes, the largest segment of the market, increased 4.4 percent to a 778,000-unit pace in June. Single-family starts in the South, where most home building takes place, gained 0.5 percent.

Single-family starts jumped 31.6 percent in the Northeast and climbed 3.1 percent in West. Groundbreaking on single-family housing projects increased 7.3 percent in the Midwest.

But single-family home construction continues to run ahead of permits, which could limit gains in the near term.

Housing starts for the volatile multi-family segment rose 5.4 percent to a 411,000-unit pace. The multi-family segment of the market continues to be supported by strong demand for rental accommodation as some Americans remain wary of homeownership in the aftermath of the housing market collapse.

But economists see limited scope for further increases, saying that much of the demand has already been met. Rent increases for apartments have started to moderate in some cities and vacancy rates are edging up.

Building permits increased 1.5 percent to a 1.15 million-unit rate last month. Permits for the construction of single-family homes increased 1.0 percent last month to a 738,000-unit rate, while multi-family building permits advanced 2.5 percent to a 415,000-unit pace.