U.S. home building fell last month after reaching a 12-year high in August, driven by a sharp decline in the construction of new apartments. Yet single-family home construction ticked higher for a fourth month.

The Commerce Department said Thursday that overall housing starts dropped 9.4% to a seasonally adjusted annual rate of 1.26 million. The construction of new apartments plunged 28.3% to an annual pace of 327,000.

The report suggests the housing market is in solid shape, despite last month�s drop. The construction of both homes and apartments has risen 1.6% in the past year. And single-family home building ticked up 0.3% in September to an annual rate of 918,000. Single-family construction typically creates more jobs than apartment units. Permits for single-family home building also rose slightly, a good sign for future building.

Lower mortgage rates and a healthy job market that is modestly increasing wages are lifting home sales and the demand for new homes. Sales of existing homes rose to a 17-month high that month and sales of new homes jumped. The average interest rate on a 30-year mortgage ticked up last week but is still at a historically low level of 3.69%.

�The upward trend for single-family construction aligns with other housing data that show strong demand for new homes by homebuyers in response to lower mortgage rates and rising incomes,� said Ben Ayers, senior economist at Nationwide. �The extremely tight inventory for existing homes is also pushing more buyers into the market for new homes.�

Building permits have also increased in the past year, rising 7.7%. Permits to build single-family homes rose 2.8% in September from a year earlier while apartment permits soared nearly 21%.

In September, construction fell the most in the Northeast, where it plummeted 34.3%. It also dropped sharply in the Midwest, where it declined 18.9%. Starts dropped 4% in the South and 1.9% in the West.

Mortgage rates are near historic lows, with the average interest rate on a 30-year loan below 4%. They may fall further in the coming months if the Federal Reserve cuts short-term rates at its next meeting later this month, as some economists predict.

(AP)