Permits to break ground, an indicator of builder confidence in future business, also jumped to the highest level in more than 16 years.

Housing starts rose to a seasonally adjusted annual rate of 1.835 million units last month from an upwardly revised 1,747 million rate in November. Starts on single-family homes were at their highest level since 1978, while single-family permits set a record in December. Permits jumped 8.2 percent to a seasonally adjusted annual rate of 1.880 million units from an upwardly revised 1.738 million in November.

In terms of full-year figures, estimated housing starts at 1,705 million and estimated total permits at 1.726 million for the whole of 2002 would be the highest levels since 1986, according to the Department.

Starts on single-family homes of 1.360 million for the year would be the highest level since 1978. Single-family housing permits of 1.319 million would be the highest since the government began keeping the records in 1959.