Washington ? Construction of new homes and apartments posted an unexpectedly strong gain of 5 percent in December as the housing industry wrapped up its best performance in 16 years, a building boom fueled by the lowest mortgage rates in four decades.

The Commerce Department reported Tuesday that construction activity climbed to an annual rate of 1.84 million units in December, the highest monthly pace since June 1986 and well above economists’ expectations.

In addition, the government revised November activity higher to show builders were starting new units at an annual rate of 1.75 million units during that month, 5.2 percent above the October level.

For all of 2002, builders began construction on 1.70 million new homes and apartments, a 6.4 percent gain from the 1.60 million units constructed in 2001. It was the best year for construction of single-family homes and apartments since 1.81 million units were built in 1986.

For just single-family homes, the 1.36 million units that were begun in 2002 represented the strongest performance since 1978 when builders broke ground on 1.43 million single-family homes.

“What started off robustly ended even more strongly, if that’s possible,” said Joel Naroff, chief economist of a Holland, Pa., forecasting firm. “During the year, housing starts reached levels not seen since the baby boomers hit the market in the 1970s.”

All parts of the country shared in the building boom with construction of single-family homes setting an all-time high in the South.

During 2002, construction of homes and apartments rose 6.8 percent in the South — the highest percentage increase in the nation.

Elsewhere, construction of homes and apartments was up 6.4 percent in the Northeast to 158,700 units, the highest level since 1989. Housing starts were up 5.7 percent in the Midwest to 349,100 units, the highest level since 1979, while construction in the West rose 6.2 percent to 415,500 homes and apartments, the highest level since 1987.