A lack of existing inventory and solid demand helped offset rising mortgage rates and push single-family production higher in July, even as builders continue to grapple with elevated construction and financing costs as well as a lack of skilled labor.

Overall housing starts increased 3.9% in July to a seasonally adjusted annual rate of 1.45 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The July reading of 1.45 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 6.7% to a 983,000 seasonally adjusted annual rate. Single-family starts are also 9.5% higher than a year ago. The multifamily sector, which includes apartment buildings and condos, decreased 1.7% to an annualized 469,000 pace.

The number of single-family units under construction is down 16.9% compared to a year ago at 678,000. Meanwhile, the number of apartments under construction increased to 1 million, the highest total on record.

On a regional and year-to-date basis, combined single-family and multifamily starts are 17.6% lower in the Northeast, 13.8% lower in the Midwest, 9.4% lower in the South and 16.7% lower in the West.

Overall permits increased 0.1% to a 1.44 million unit annualized rate in July. Single-family permits increased 0.6% to a 930,000 unit rate. Single-family permits are also up 1.3% compared to a year ago. Multifamily permits decreased 1% to an annualized 512,000 pace, the lowest level since October 2020.

Looking at regional permit data on a year-to-date basis, permits are 24.2% lower in the Northeast, 20.3% lower in the Midwest, 15.4% lower in the South and 21.6% lower in the West.