Construction of homes nationally surged in April to the highest level in 18 months, fueled by buyers capitalizing on an expiring tax credit. Permits for new construction sank, signaling the rebound could fade.

Low mortgage rates and two tax credits -- up to $8,000 for new buyers and $6,500 for owners who buy and move into another home -- have boosted home sales this year from Utah to both coasts. To receive a tax credit, borrowers had to have a signed offer by April 30 and must close the deal by the end of June.

The rate of home building has risen more than 40 percent from the bottom in April 2009, though it's still down 70 percent from the decade's peak in January 2006.

April also was a busy month along the Wasatch Front. Although official sales numbers aren't available, builders took out permits for construction of 550 single-family homes, up nearly 37 percent from 402 in April 2009, according to Construction Monitor. That's still far off a peak of 1,287 in April 2006, but local builders say the year-over-year increase is encouraging.

Without the tax credit, though, analysts say home sales will slow in the second half of this year. High unemployment and tight lending standards could keep some buyers away.

The national report Tuesday from the Commerce Department said the rate of construction of single-family homes and apartment buildings rose 5.8 percent last month, to a seasonally adjusted annual rate of 672,000. That was up from an upwardly revised March level of 635,000. The rate, the highest since October 2008, was driven by a 10 percent increase in single-family home building.

In the Commerce report, the government said building permits, a gauge of future activity, sank 11.5 percent, to an annual rate of 606,000. That's the lowest point since October 2009.

Still, a survey Monday showed home builders are feeling more optimistic. The National Association of Home Builders said its housing market index, which tracks industry confidence, rose three points this month, to 22, the highest reading since August 2007. Readings below 50 indicate negative sentiment.

In March, sales of new homes rose 27 percent. That was the biggest monthly increase in 47 years.

A four-decade low stockpile of new single-family homes, combined with low interest rates and prices, has made home buying affordable, said Sal Guatieri, an economist with BMO Capital Markets. That means that even without the tax credits, housing starts should rise modestly.

A separate report Tuesday showed wholesale inflation remains tame. Prices fell 0.1 percent in April, the second drop in three months. Core inflation, which excludes volatile energy and food prices, rose 0.2 percent, the Labor Department said. But during the past year, core prices are up just 1 percent.

The absence of inflation pressures means the Federal Reserve can keep interest rates at record lows to bolster the economic recovery.