Builders began construction of single-family homes at a faster pace in August, and building permits for construction hit a five-year high, according to the U.S. Department of Commerce.
The agency said construction starts on single-family homes surged 7 percent to an annual rate of 628,000 units in August, the highest level in six months. Single-family homes are by far the largest segment of the market.
Groundbreaking in the volatile apartment and condominium sector fell 11.1 percent. That limited the rise in overall housing starts to an 891,000-unit annual rate, much smaller than the 917,000-unit rate economists had expected.
While higher mortgage rates have slowed home sales, demand for homes, as the rate of household formation rises, is expected to bolster residential construction.
“Home building seems to be holding up decently in the higher mortgage rate environment, probably due to the support of strong underlying fundamentals — thin inventories and steady household formation,” economist Guy Berger told Reuters.
In a separate report, the Mortgage Bankers Association said applications for home loans rose last week as mortgage rates eased off recent highs. Since early May, rates on 30-year mortgages have risen more than 1 percentage point to about 4.5 percent.
Last month, building permits for single-family homes rose 3 percent to their highest since May 2008.