The pace of U.S. home building unexpectedly strengthened in September as new housing starts rose 5.9 percent, but new building permits fell more than expected to a near five-year low, a government report showed on Wednesday.

The Commerce Department said September housing starts came in at an annual pace of 1.772 million units, compared with an upwardly revised 1.674 million pace in August. Economists had forecast September housing starts to edge down to 1.64 million units from August's originally reported pace of 1.665 million.

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Compared to a year earlier, September housing starts were down 17.9 percent from the September 2005 pace of 2.158 million units.

Permits for future groundbreaking, an indicator of builder confidence, fell 6.3 percent to an annual pace of 1.619 million units, the lowest rate since October 2001, from a 1.727 million rate in August. Economists had expected the Commerce Department to report September permits at a 1.702 million pace. They were down 27.7 percent from the same time a year ago.

The data came amid mixed signals from the housing industry. A private survey of U.S. homebuilder sentiment ticked higher in October. The National Association of Home Builders/Wells Fargo Housing Market index on Tuesday eked out a one-point gain to 31 points in October after reaching a 15-year low of 30 in September.

But the Mortgage Bankers Association reported that applications for U.S. home mortgages fell last week, pulled down by a drop in refinancing as interest rates rose for the third straight week. The group's seasonally adjusted index of total mortgage applications fell 2.2 percent in the week ended Oct. 13 to 585.8, extending its drop for a second consecutive week.

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