Permits for future building slipped 3 percent to just over 1 million, down from 1.04 million in October. The drop reflected a decline in apartments, which can be volatile. Permits for single-family homes rose.
"Evidently, builders in the field are genuinely confident about the outlook for sales of new single-family houses, despite the rise in mortgage rates," said Pierre Ellis, an economist at Decision Economics.
The housing market has been improving steadily since early last year, but construction had leveled off this summer after first reaching a 1 million annual pace in March. Last month's surge comes as mortgage rates remain about a percentage point higher than they were in the spring. That suggests home building will boost economic growth in the final three months of the year.
The average rate on a 30-year mortgage fell to 4.42 percent last week. That's down from a peak of 4.6 percent in August.
Rates jumped by more than a full percentage point after Federal Reserve Chairman Ben Bernanke first suggested in May that the Fed would pull back on its $85 billion bond-buying program before the end of the year. The Fed concludes a two-day meeting Wednesday, but most economists expect it won't start reducing its purchases until January or March.
Home construction soared in the Midwest and South, while it fell in the Northeast and rose modestly in the West.
The surge comes as homebuilders are more confident. The National Association of Home Builders/Wells Fargo builder sentiment index, released Tuesday, matched an eight-year high first reached in August.
Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.