Construction of new homes increased in May by 17.2%, the largest amount in three months, an encouraging sign that the nation’s deep housing recession is beginning to bottom out.

In another encouraging sign, applications for building permits, seen as a good indicator of future activity, rose 4% in May.

The better-than-expected rebound in construction is the latest sign that the prolonged slump in housing is coming to an end. However, analysts don’t expect a quick rebound. The economy is still shedding jobs and home prices are falling in many places, making consumers hesitant to commit to buying a new home. Additionally, many economists feel that, due to the large number of unsold homes and a record wave of mortgage foreclosures, any sustained rebound isn’t expected to take hold until next spring with sales not showing significant gains until the summer of 2010.