WASHINGTON (Reuters) – U.S. single-family homebuilding surged in September, cementing the housing market’s status as the star of the economic recovery, thanks to record-low interest rates and a migration to the suburbs and low-density areas as Americans seek more room for home offices and schooling.

The report from the Commerce Department on Tuesday reinforced expectations that the economy rebounded sharply in the third quarter after suffering its deepest contraction in at least 73 years in the second quarter. But the recovery from the COVID-19 recession has entered a period of uncertainty, with fiscal stimulus, which spurred the burst in activity last quarter, depleted.

Single-family homebuilding, the largest share of the housing market, jumped 8.5% to a rate of 1.108 million units last month. But starts for the volatile multi-family housing segment fell 16.3% to a pace of 307,000 units.

Overall, housing starts increased 1.9% to a seasonally adjusted annual rate of 1.415 million units last month. Data for August was revised down to a 1.388 million-unit pace from the previously reported 1.416 million. Groundbreaking activity rose in the West, South and Northeast, but fell in the Midwest.

Economists polled by Reuters had forecast starts increasing to a rate of 1.457 million units in September.

A survey on Monday showed confidence among single-family homebuilders increased to a record high in October. Builders, however, said constructing affordable homes was becoming increasingly challenging because “shortages of lots, labor, lumber and other key building materials are lengthening construction times.”

The housing market has been a bright spot in the economy despite 25.3 million people being on unemployment benefits. Unemployment has disproportionately affected low-wage workers, who are typically young and renters. The 30-year fixed mortgage rate is around an average of 2.81%, according to data from mortgage finance agency Freddie Mac.

The report followed data last week showing an acceleration in retail sales in September. Growth estimates for the July-September quarter are as high as a 35.2% annualized rate, which would recoup roughly two-thirds of the output lost because of the pandemic COVID-19.

The economy contracted at a 31.4% pace in the second quarter, the deepest decline since the government started keeping records in 1947. With government money gone, growth estimates for the fourth quarter have been slashed to as low as a 3% rate from above a 10% pace.

Permits for future homebuilding increased 5.2% to a rate of 1.553 million units in September. Single-family building permits rose 7.8% to a rate of 1.119 million units. Multi-family building permits slipped 0.9% to a rate of 434,000 units.

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