Housing starts rose to a seasonally adjusted annual rate of 1.1 million in November, rising almost 23% from October.
The housing construction numbers follow Tuesday's report of a strong bounce back in U.S. home builder confidence.
The National Association of Home Builders/Wells Fargo builder sentiment index climbed to 58 in December. That matched an 8-year high reached in August.
Housing starts should pick up further next year as the industry gradually recovers, says the National Association of Home Builders.
It expects 825,000 starts next year for single family homes and 322,000 for multi family homes.
That's still far below "normal," which NAHB considers to be about 1.3 million for single family and 324,000 for multi family, says David Crowe, NAHB chief economist.
By Julie Schmit