Builders in November broke ground on more homes, a sign the recovery in home building may carry through into 2010.

Housing starts rose 8.9% to an annual rate of 574,000, the Commerce Department said Wednesday. Building permits, a sign of future construction, climbed to the highest level in a year.

"Housing is in recovery mode, though the pace appears to have downshifted somewhat," said Aaron Smith, a senior economist at Moody's in West Chester, Pa., which forecast a 575,000 rate. "The combination of the homebuyers' tax credit, good affordability and looser credit conditions going forward will continue moderate gains."

Housing starts matched the median estimate of 78 economists surveyed by Bloomberg News. Projections ranged from 540,000 to 620,000. The government revised October's reading downward, to 527,000, from the 529,000 previously estimated.

The report on housing starts showed building permits increased to a 584,000 pace, the highest level since November 2008, from 551,000 the prior month. Permits were forecast to rise to 570,000.

Construction of single-family houses, which accounted for 84% of the construction last month, increased 2.1%, to a 482,000 rate.

Work on multifamily homes, such as townhouses and apartment buildings, jumped 67%, to an annual rate of 92,000.

All four regions showed a gain in starts in November, led by a 16% increase in the Northeast. Work began on 12% more homes in the South, 3% in the Midwest and 1.9 % in the West.

Favorable weather may have also played a role in boosting construction last month, said Patrick Newport, an economist at IHS Global Insight in Lexington, Mass.

November was the third warmest in 115 years of record keeping, according to the National Climatic Data Center, giving builders an opportunity to keep working. By contrast, October was the wettest in the past century.

President Obama's extension last month of a first-time-homebuyer tax credit of as much as $8,000 until April 30 will also give builders reason to speed up projects over the next couple of months.

Any sustained recovery will require gains in employment, economists said.

Confidence among home builders unexpectedly fell in December on concern the lack of jobs and tight credit will limit a recovery. The National Association of Home Builders/Wells Fargo sentiment index decreased to the lowest level since June, the association said Tuesday. Readings below 50 mean most respondents view conditions as poor.

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