U.S. housing starts rose in July, the government said on Thursday, as the housing sector continued its strong performance in an otherwise struggling economy.

Ground-breaking for new homes was at a seasonally adjusted annual rate of 1.672 million units last month, a 2.8 percent increase from the June rate of 1.627 million, the Commerce Department said in its report. Starts rose 13.2 percent from a year ago. 

July housing starts exceeded the estimates of analysts polled by Reuters, who forecast a 1.627 million rate. Housing starts were at the highest level since February 2000. 

Meanwhile, building permits declined in July for the second month in a row, Commerce said. 

Permits to start construction declined 1.8 percent to a seasonally adjusted annual rate of 1.558 million, down from 1.587 million in July. It was the lowest rate for permits since December 2000. 

Permits were still up 1.6 percent from a year ago. 

Regionally, starts jumped dramatically in the Northeast, with a 21.3 percent increase. Groundbreaking for new homes increased by 3.8 percent in the South and by 2.3 percent in the West, but fell 6.8 percent in the Midwest. 

Permits also jumped in the Northeast, rising 13.4 percent. But they fell in all other regions of the country, declining by 6.4 percent in the Midwest, by 3.3 percent in the West, and by 1.8 percent in the South. 

Analysts say the housing sector has remained strong on low mortgage rates, following six interest rate cuts by the U.S. Federal Reserve so far this year. 

The national average 30-year fixed rate mortgage was 7 percent last week for the second week in a row. The long-term home loan was just over 8 percent a year ago.