WASHINGTON -- New home construction posted another solid gain in October, pushing housing starts to their highest level in nearly four years, the government reported yesterday.

Economists said the increase reinforced their view that the home-building sector will continue to strengthen in the coming months thanks to stronger overall growth in the economy while interest rates remain relatively low.

Housing starts grew a seasonally adjusted 2.7% in October to an annual rate of 1.396 million units, the Commerce Department reported. The increase was bigger than expected and followed gains in the two previous months.

The October level marks the best showing for housing starts since February 1990, when starts reached 1.44 million units, the department said. Meanwhile, building permits, a slightly better indicator of future activity, gained 2.8% in October to a 1.306 million annual rate, its highest level in nearly four years as well.

"It certainly was a good report," said Mark Obrinsky, senior economist of the Federal National Mortgage Association. "It confirms the picture that we've got continued strength in single-family units and a different story with multifamily units."

Single-family units, which account for the majority of total starts, grew 5.8% in October to a 1.224 million rate, following a 2.2% decline in September, the department reported. This is the highest level for single-family units in six years, an official said.

The gain more than offset a 14.9% drop in multifamily units, which fell in October to a 172,000 rate, following a 39.3% surge in September, according to government data.

Mark Lasky, senior economist of DRI/McGraw-Hill, said the October level for total starts was not much of a surprise. But he did not expect quite so much strength in single-family units and not quite so much weakness in multifamily units.

Several analysts, including Lasky, said they expect housing starts to drift above the 1.4 million rate in the coming months and then sustain that level for all or part of next year. Monthly starts averaged about a 1.31 million annual rate last quarter.

Jim O'Sullivan, domestic economist with J.P. Morgan and Co., said he expects monthly starts to stay above the 1.4 million mark most of next year because he feels there is considerable pent-up demand in the housing market.

This demand, O'Sullivan said, is slowly being unleashed by continued job and income growth coupled with low mortgage rates. "This upward trend is primarily driven by interest rates and the effects are finally kicking in," he said.

Analysts also noted that recent builder surveys show a dramatic pickup in buyer traffic in houses for sale. Also, single-family home sales surged 20.8% in September to the highest level in almost seven years, the Commerce Department reported earlier this month.

Total housing starts in the first 10 months of 1993 are 4.9% higher than last year's pace, the department said. Economists predicted that total starts this year will end up around 5% higher than last year. Lasky said the year-over-year gain may be as high as 6%.

Economists described this as a respectable year-over-year gain, given a very weak first quarter for starts, which was attributed to abnormally bad weather.

Regionally, housing starts activity was mixed in October. Starts fell 9.4% in the Northeast and 2.4% in the West, while gaining 13.3% in the Midwest and 2.8% in the South, the department reported. Permits activity in October was slightly brighter, gaining everywhere except in the West, where they fell only slightly, according to government figures.

Single-family permits grew 5% in October while multifamily permits dropped 7.6%.

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