LOS ANGELES (AP) -- Homebuilder shares gained Tuesday, helped by a report showing that U.S. construction activity climbed to the highest level in more than four years in August.
The Commerce Department reported that construction spending increased 0.6 percent in August from the previous month, when spending increased a strong 1.4 percent. The July gain was revised to show an increase that was more than double the initial estimate.
Total construction rose to a seasonally adjusted annual rate of $916.1 billion, the fastest pace since April 2009, while housing activity rose 1.2 percent.
Low mortgages rates and pent-up demand for homes have helped propel the housing market this year, lifting homebuilders' shares.
The sector's stocks surged immediately after the report, but pared gains as midday approached.
Many investors have been cool on the sector in recent months amid concerns over rising mortgage interest rates.
Some builders reported a slowdown in sales this summer as mortgage interest rates began to tick up in May, stoking worries that rising rates could hinder the housing recovery.
Rates began to increase after Federal Reserve Chairman Ben Bernanke signaled the central bank might reduce its $85-billion-a-month in bond purchases. The bond buys are intended to keep longer-term interest rates low, including mortgage rates.
But the Fed held off last month, and since then mortgage rates have moved lower. And with tepid job growth and the impact from the partial government shutdown still being assessed, observers are saying it's likely the Fed will maintain its bond purchases for the rest of this year.
With several homebuilders due to report third-quarter earnings this month, Wall Street will be watching for signs that builder sales remain on a growth track.
Here's a look at how some homebuilder shares were faring in morning trading on Tuesday:
PulteGroup Inc. shares rose 12 cents to $16.50.
DR Horton Inc. shares gained 33 cents to $19 .
Lennar Corp. shares added 88 cents to $35.58.
KB Home shares rose 38 cents to $16.95.
Toll Brothers Inc. shares slipped 41 cents to $32.26.
Beazer Homes USA Inc. gained 2 cents to $18.45.
Hovnanian Enterprises Inc. rose 9 cents to $5.16.
Ryland Group Inc. added 57 cents to $39.40.
Meritage Homes Corp. rose 93 cents to $43.35.
Standard Pacific Corp. shares added 11 cents to $7.72.
MDC Holdings Inc. shares gained 84 cents to $29.83.
M/I Homes Inc. rose 69 cents to $19.44.
NVR Inc. shares added $13.66 to $905.66.
TRI Pointe Homes Inc. rose 73 cents to $15.62.
Taylor Morrison Home Corp. slipped 13 cents to $21.64.