Housing Starts Remain Strong

The number of housing starts jumped in October to its highest rate since Ronald Reagan was in office, the Commerce Department said, as 30-year fixed mortgage rates stayed at low levels.

Building began on an annualized rate of 1.960 million new homes last month -- the most since 1986 -- and 2.9% more than a revised 1.905 million in September. Economists had expected 1.85 million starts.

Separately, the Mortgage Bankers Association said its index for loan applications rose 5.9% to 663.2 on a seasonally adjusted basis from 626 a week ago. The purchase index increased 13.5% to 425.9 from 375.4 the previous week. The refinancing index fell 1.9% to 2043.9 from 2084.2 the previous week.

"Mortgage rates have drifted lower since August. This has helped the housing sector," said Gary Bigg, an economist at Bank of America, in a research note. "Residential construction grew an annualized 20% in the third quarter. Today's

housing starts report suggests that the sector will be a positive contributor to fourth-quarter growth."

On the news, shares of homebuilders

Toll Brothers

(TOL) - Get Report

,

Pulte Homes

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, and

Lennar

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were each gaining more than 1% in morning trading.

Regionally, housing starts were up 17.7% in the West, and up 4.9% in the South. Starts fell 18% in the Northeast following a 17.1% gain in September, and dropped 8% in the Midwest.

Building permits -- which are considered a gauge for future construction -- increased 5.2% to 1.97 million units. Housing permits are currently at their highest level since 1984.