Record-low mortgage rates and falling home inventory continued to bolster house and apartment construction in August, with the number of building permits up 50 percent from a year ago.

Last month, 385 permits were issued to build 901 units, including hundreds of apartments in Minneapolis, according to the Builders Association of the Twin Cities (BATC).

While builders are still operating at a fraction of the pace they once were, it was the best August in at least five years for area contractors and trades people, and the best year by a long shot since the downtown apartment boom began. So far this year, builders have been issued 2,665 permits to build 4,903 units.

"We're seeing economic indicators all pointing in the right direction," said BATC's president, Curt Christensen of Lee Lynn Construction.

That includes mortgage rates, which have been at record lows. On Thursday, Freddie Mac said that the average rate for a 30-year fixed-rate mortgage was 3.59 percent, down 0.7 percent from the previous week.

The construction industry is also getting help from an unusually strong rental market. During August, multifamily projects -- mostly apartments -- represented more than 58 percent of planned units, including two big apartment buildings. Third North, for example, is a 204-unit building that broke ground last week in the heart of the North Loop neighborhood, where an apartment boom is underway.

Mary Bujold, president of Maxfield Research Group, said that more than 1,192 units have been proposed for the neighborhood.

For developer Schafer Richardson, the project is a recent foray into rental housing. Until recently, the company has been focused on condominiums, including the Phoenix on the River, which is down to its last unsold unit.

Most of the apartments headed to Minneapolis are aimed at middle-income renters who can afford rents upwards of $2 per square foot. At the $39 million Third North project, rents haven't yet been set, but the six-story building will have two levels of underground parking and an unusual amenity package, including on-site electric-vehicle charging stations and a pet-grooming room.

Fifteen miles north in Blaine, Hans Hagen of Hans Hagen Homes, says he's experiencing a late-season bloom in new home sales, which he attributes to low mortgage rates and growing confidence that a recovery is really taking shape.

Construction activity during the month was representative of what's been happening all year long. So far this year builders have been issued 2,665 permits to build 4,903 units, easily making it the strongest year since the downturn began. Multi-family housing represented 48 percent of all units.

Hagen's sold out of townhouses that he'd built during the boom, and is now focusing on association-maintained single-family houses, which he's selling for $250,000 to $400,000. August sales were up more than 60 percent compared with last year, he said, at a time when sales tend to dwindle. It doesn't hurt, he said, that buyers feel motivated by dwindling inventory.

At the Lakes in Blaine, which once had more than 1,100 home sites, inventory is down to only about 150 lots.

"I sense that people are tired of waiting," Hagen said. "They're saying, 'Life goes on, and if I want to change a house, let's get up and do it.'"

Jim Buchta • 612-673-7376