This was the fourth consecutive month in which starts of single- and multi-family homes were above an annual pace of 1.8 million, which the National Association of Home Builders' President Kent Conine called "truly remarkable."

A small decline in long-term interest rates provided momentum for home building last month, Conine said, along with strong household formations and an accelerating U.S. economy.

The average rate on fixed-rate mortgages was just over 6 percent

in September.

The Commerce report signals "a very healthy housing market that is clearly in high gear heading into the fourth quarter," said NAHB Chief Economist David Seiders.

Single-family starts rose 3.1 percent during the month to a seasonally adjusted annual rate of 1.52 million units and multifamily starts rose 4.5 percent to a 368,000-unit rate, their highest level since last August's 381,000-unit pace.

September housing starts rose 15.1 percent in the Northeast, 8.1 percent in the Midwest and 4.2 percent in the West. They declined 1.3 percent in the South.

Seiders said that housing production this year "should easily surpass last year's very healthy 1.71 million units and will likely approach the 1.8 million-unit mark, a level last seen in 1986."

He added that single-family starts could equal or surpass the highs of the late 1970s.