U.S. housing starts unexpectedly fell in October, but a jump in permits to near a 6-1/2-year high suggested the housing market was steadily regaining strength.

Groundbreaking slipped 2.8 percent to a seasonally adjusted annual 1.009 million-unit pace, the Commerce Department said on Wednesday. September's starts were revised up to a 1.038 million-unit rate.

Economists polled by Reuters had forecast starts rising to a 1.025-million unit rate from September's previously reported 1.017-million unit pace.

The volatile multi-family homes segment accounted for the decline in housing starts last month. Starts for single-family homes, the largest part of the market, rose for a second straight month to their highest level in nearly a year, a good omen for housing.

While residential construction, homebuilder sentiment and sales have been trending higher in recent months, sluggish wage growth and stringent lending practices by financial institutions continue to constrain activity.

Still, home building is expected to contribute to gross domestic product in the fourth quarter after being neutral in the July-September period.

Starts for single-family homes increased 4.2 percent last month to a 696,000-unit pace, the highest since November of last year. Multi-family homes starts fell 15.4 percent to a 313,000-unit rate in October.

Last month, permits jumped 4.8 percent to a 1.080 million-unit pace, the highest since June 2008. It was the second straight month of gains in permits, which lead starts.

Permits for single-family homes rose 1.4 percent to a 640,000-unit pace. Permits for multi-family housing surged 10 percent to a 440,000-unit pace.