U.S. housing starts rose 6.4% in October to the highest level of the year, the Commerce Department said Wednesday.
Builders broke ground at an annual rate of 2.027 million residential units. The September rate, higher than first reported, was 1.905 million.
Mortgage rates that have stayed below 6% since July are keeping interest in homebuying near record levels. The data released Wednesday suggest that housing will continue to contribute to economic growth through the end of this year.
"The housing sector for the time being is still in pretty good shape," said Jan Hatzius, a senior economist at Goldman Sachs & Co. in New York who had forecast a 2.012 million rate for October. "The growth pace in housing activity has slowed down, but the level is still quite high."
The October rate is the highest since December's 2.067 million. The median forecast of 65 economists in a Bloomberg News survey was 1.96 million; estimates ranged from 1.85 million to 2.088 million.
Starts of single-family homes rose 5.7% from September, to a 1.645 million-unit pace. Starts of townhouses, apartments, and other multifamily dwellings rose 9.5%, to a 382,000 annual rate.
D.R. Horton Inc., the largest U.S. homebuilder by market value, said last week that fiscal fourth-quarter profit rose 52% from a year earlier as low borrowing costs boosted sales.
Starts rose 4% in the South, to an annual pace of 932,000; 5% in the West, to 525,000; and 8.6% in the Midwest, to 390,000. They surged 20% in the Northeast, to 180,000.
"Housing demand remains quite healthy," wrote Elisabeth Denison, an economist at Allianz Group's Dresdner Kleinwort Wasserstein in New York, before the report.
"The housing sector is still one of the strongholds of the economy."
Hurricanes Frances, Ivan, and Jeanne, which caused millions of dollars of damage in the Southeast, may have delayed the start of some housing construction in September and pushed it into October.
The number of homes authorized but not yet started fell 4.5% in October, to 194,400.
Houses already under construction last month rose 1.3%, to a 1.254 million rate. Housing completions rose 2.7%, to a 1.834 million rate. Single-family completions fell 0.1%, to 1.538 million.
Housing starts are expected to total a record 1.994 million this year, according to Commerce Department data.
The average interest rate on a 30-year fixed mortgage was 5.76% in September and 5.72% last month.
The record low of 5.21% was reached in June 2003.
On Nov. 5 the National Association of Realtors raised its estimate of 2004 sales of new and existing homes to a record 6.55 million, saying mortgage rates near historic lows came as a surprise.
The trade group said it expects sales of new homes to be 1.17 million this year, also an all-time high.
The Commerce Department is to report new home sales for October on Nov. 24. The inventory of new homes fell to a 4.1-month supply in September, from 4.2 months in August, the department said last month.
