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
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.