U.S. housing starts rose to their highest rate in more than four years in October, suggesting the housing market recovery was gaining steam, even though permits for future construction fell.
The Commerce Department said on Tuesday housing starts increased 3.6 percent to a seasonally adjusted annual rate of 894,000 units — the highest since July 2008. Economists had expected groundbreaking to slow to an 840,000-unit rate.
The department said , which slammed the East Coast in late October, had a minimal impact on the data. Groundbreaking in the Northeast, which fell 6.5 percent last month, accounted for about 8 percent of overall housing starts.
"We expect to see further strength in the housing market next year, driven by the multifamily sector. Home values are rising, which will help the low-growth economy we have," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
The housing market has turned around after an unprecedented collapse that landed the economy in its worst recession since the Great Depression. The recovery, marked by rising home sales, prices and building activity is being driven by pent-up demand against the backdrop of record low mortgage rates. (Read More: )
The has targeted housing as a channel to boost growth, announcing in September that it would buy $40 billion in per month until the outlook for employment improved substantially.
A steady rise in the number of U.S. households, which fell during the 2007-09 recession as financially strapped Americans moved in with family and friends, is propping housing.