U.S. homebuilding increased more than expected in August, a positive sign for the housing market which has underperformed the broader economy amid rising interest rates for home loans.

Housing starts rose 9.2 percent to a seasonally adjusted annual rate of 1.282 million units in August, the Commerce Department said on Wednesday. Analysts polled by Reuters has expected an annual rate of 1.235 million units.

The Commerce Department raised its estimate for starts in July to a 1.174 million-unit rate.

U.S. housing starts data can be volatile and subject to large revisions. Much of August's gain was in the particularly volatile multi-family component, with starts on buildings with two or more units rising 29.3 percent to an annual rate of 406,000 units.

Single-family homebuilding, which accounts for the largest share of the housing market, rose a more modest 1.9 percent to a rate of 876,000 units in August.

Groundbreaking activity increased in the Midwest, South and West, but was flat in the Northeast.

Building permits, however, fell 5.7 percent to a rate of 1.229 million units.

The U.S. housing market has underperformed a robust economy, with economists blaming the slowdown on low inventories and rising mortgage rates, which have combined with higher house prices to make home purchasing unaffordable for some first-time buyers.