The Commerce Department reported today that housing starts rose 3.6 percent in October to an annual pace of 894,000, the best rate in more than five years.

Superstorm Sandy had a "minimal" effect on residential construction for October, the Commerce Department said, though the storm is expected to boost new building permits in the coming months.

"Housing is absolutely going in the right direction," Harm Bandholz, chief U.S. economist at UniCredit Group in New York, told Bloomberg News. "Excess supply has been wound down and there's a steady increase in demand. That's good for construction."

One reason for the improved starts is record-low mortgage rates. Freddie Mac said last week the rate on a 30-year loan dropped to 3.34 percent. That's down from the previous record low of 3.36 percent set on October 4, which was the lowest since long-term mortgages began in the 1950s. Last year at this time, the 30-year loan averaged 4 percent.

The average rate on a 15-year fixed mortgage is down to 2.65 percent, from the previous record low of 2.66 percent set October 18. A year ago at this time, the 15-year loan averaged 3.31 percent.