Biggest weekly gain in 9 months for US homebuilders

In a week when stock markets were roiled over concern that the global economy is faltering, homebuilders in the United States had the biggest gain in almost nine months.

The 11-member Standard & Poor's Supercomposite Homebuilding Index rallied 6 per cent since October 10, the largest weekly increase since January, as global turmoil fuelled a plunge in mortgage rates and housing starts jumped.

The broader S&P 500 Index recorded its fourth week of losses.

"Even when the market was having some pretty bad days, the builders outperformed," said Megan McGrath, an analyst with MKM Holdings. "A lot of little things have gotten together to get people maybe a little more optimistic."

A drop in mortgage rates has the potential to boost home sales and gives builders reason to take on more projects. Average rates on 30-year home loans fell to 3.97 per cent, the lowest since June last year, according to Freddie Mac.

The Department of Commerce said housing starts climbed 6.3 per cent last month to an annual pace of 1.02 million, crossing what McGrath called the "psychologically important" one million barrier.

Shares of homebuilders extended gains after reports the Federal Housing Finance Agency, which regulates Freddie Mac and Fannie Mae, plans new steps to encourage lending to buyers with less-than-perfect credit scores.