U.S. housing starts surged 5% in December to their highest level since mid-1986, the Commerce Dept. said Tuesday.

Mortgage rates have dipped to levels not seen since 1965 as the stock market remains in a three-year swoon, fueling home buying and building, making the sector one of the rare bright spots in the sluggish U.S. economy.

Permits to break ground also jumped to the highest level in more than 16 years, and single-family permits set a record in December.

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. Single-family starts were at their highest level since 1978.