WASHINGTON -- Home-building activity increased for the fourth straight month in July, showing that the housing sector continues to remain the bright spot in the overall U.S. economy.

Housing starts rose by 1.5% to a seasonally adjusted 1.872 million annual rate, the Commerce Department (news - web sites) said Tuesday. This follows a revised increase of 5.7% in June to a 1.845 million rate. Previously, June starts were reported as rising 3.7% to a 1.803 million annual rate.

The report was stronger than analysts had expected. A Dow Jones Newswires-CNBC poll of 12 economists predicted housing starts would fall by 1% to a 1.785 million annual rate.

The housing sector of the U.S. economy has remained strong for the past several years and has defied analysts' expectations as it weathered the 2001 economic recession.

The July report showed that building permits, an indicator of future building activity, dropped by 2.4% to a 1.780 million annual rate.

Single-family starts rose by 1.9%, while multifamily starts, or starts on apartment buildings, fell by 1.8%.

Housing starts rose in all regions except for the West where they dropped by about 14%. Housing starts jumped by 19% in the Northeast, increased by 5.7% in the Midwest and rose by 5.6% in the South.

July housing starts increased about 12% from the year-earlier period. An estimated 174,000 houses were actually started, based on seasonally unadjusted figures. An estimated 163,600 building permits were issued in July, also based on unadjusted figures.

- Dawn Kopecki, Dow Jones Newswires; 202-862-6637; dawn.kopecki@dowjones.com 

(Jennifer Corbett Dooren contributed to this report.)