WASHINGTON D.C. ( TheStreet) -- Construction spending was better than expected in October, reaching a level virtually equivalent to September -- a surprise result that has sent shares in the homebuilding sector higher in Tuesday morning trading.

The Census Bureau monthly report did not show significant growth in construction, but remaining flat is good when the market actually had been predicting a drop in construction spending.

The rationale behind the expected drop was that the September increase -- which had shown the biggest gain in housing activity since July 2003 -- reflected a last minute rush to get homes built ahead of the looming expiration of the first-time home-buyer tax credit. With the October numbers, it was expected that the tax-credit rush would be taken out of the equation and the numbers would fall off as a result.

In October, construction spending was estimated at a seasonally adjusted annual rate of $910.8 billion, nearly the same as the revised September estimate of $910.4 billion. The October figure is 14.4% below the October 2008 level.

Most of the major homebuilder stocks rallied on Tuesday, with gains of between 1%-3%, led by Ryland Group ( RYL), which was up 3.2% at the close. The Tuesday rally followed a Monday swoon and poor year-end outlook for most of the homebuilding sector.

Spending on private construction was at a seasonally adjusted annual rate of $589 billion, 0.3% above the revised September estimate of $587.2 billion. Residential construction was the biggest bright spot in the report, at a seasonally adjusted annual rate of $250.3 billion in October, 4.4% above the revised September estimate of $239.7 billion.

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