REAL ESTATE TOPICS...U.S. housing starts surge, permits hit five-month high

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. housing starts in November rebounded from a seven-month low and permits surged to a five-month high, signs of strength in the housing market that could give the Federal Reserve more confidence to raise interest rates on Wednesday.

Groundbreaking jumped 10.5 percent to a seasonally adjusted annual pace of 1.17 million units, the Commerce Department said on Wednesday.

The strong report came as Fed officials were due to resume a two-day monetary policy meeting. The U.S. central bank is expected to raise its benchmark overnight interest rate from near zero at the end of the meeting in what would be the first rate hike in nearly a decade. The move is not expected to derail the housing recovery.

Prices of U.S. Treasuries held at session lows after the data, while the U.S. dollar was flat. U.S. stock index futures were trading higher.

November marked the eighth straight month that starts remained above 1 million units, the longest stretch since 2007. Economists expect housing starts to average around 1.1 million units for 2015, which would be the highest level since 2007 and up from 1.0 million units in 2014.

Robust household formation as labor market strength encourages young adults to leave their childhood homes is underpinning the housing market recovery.

But the sector remains constrained by a persistent shortage of houses available for sale. This has resulted in home prices rising faster than salaries, pushing more people towards renting.

Economists polled by Reuters had forecast housing starts rising to a 1.135 million-unit pace last month.

Single-family housing starts, the largest segment of the market, increased 7.6 percent to a 768,000-unit pace. That was the highest reading since January 2008. Activity was probably boosted by mild weather.

Groundbreaking on single-family projects rose 8.8 percent in the South, where most home building takes place. Single family starts in the West jumped 15.1 percent to their highest level since September 2007. Starts also rose in the Northeast, but fell in the Midwest.

Starts for the volatile multi-family segment surged 16.4 percent to a 405,000-unit pace.

Building permits vaulted 11 percent to a 1.29 million-unit rate last month, the highest level since June. Permits are running ahead of housing starts, which means groundbreaking will remained supported in the months ahead.

Permits for the construction of single-family homes increased 1.1 percent last month to their highest level since December 2007. Multi-family building permits soared 26.9 percent.