Apartment construction across the country dipped slightly last month, but permits to build single-family houses hit a five-year high, suggesting that higher mortgage rates have yet to derail the housing recovery.

Housing starts rose a disappointing 0.9 percent to an 891,000 annual rate, following the prior month’s 883,000 pace, according to the U.S. Commerce Department. Meanwhile, permits rose to the highest seasonally adjusted rate since May 2008.

“Permits, which lead starts, were at a total level in line with most economists’ expectations,” said Jonathan Smoke, chief economist at Hanley Wood, a Washington firm that tracks commercial and residential construction in North America.

Apartment construction has led the housing recovery in the Twin Cities and beyond, but it’s a sector of the industry that tends to be extremely volatile from month to month.

Even so, the Twin Cities remains one of the most active markets for apartment construction in the nation.

Hanley Wood’s three-month moving average (intended to smooth out month-to-month variations) shows that Twin Cities builders pulled 5,694 permits to build apartments, a 35 percent increase over last year and the 15th-highest volume of the 120 metro areas tracked by the group.

Single-family permits rose in only 39 percent of those regions, including an 88 percent increase in the Duluth metro area.

The Commerce Department report was closely watched because it arrived in the midst of concerns that rising mortgage rates might dampen home sales. It was also the same day that Federal Reserve officials met to assess whether the economy is strong enough to warrant scaling back its stimulus efforts, which it did not.

Mortgage rates, which remain near historic lows, have been on the rise since May. For the week ended Sept. 12, the average rate for a 30-year, fixed-rate mortgage was 4.57 percent, the highest level since July 2011.

“Higher mortgage rates are a negative for the pace of the housing recovery,” said Russell Price, senior economist at Ameriprise Financial Inc. “Builders are aware that conditions aren’t as optimal as before. Housing has clearly been the brightest part of the economy.”

Despite recent uncertainties in the market, a National Association of Home Builders/Wells Fargo housing market index showed that builder confidence during September remained at its highest level in nearly eight years.

Construction of single-family houses climbed 7 percent to a 628,000 rate, the most since February, from 587,000 the prior month. Work on multifamily homes, such as townhouses and apartment buildings, dropped 11.1 percent to an annual rate of 263,000.

The Builders Association of the Twin Cities, which tracks local permit data, said that requests for permits to build single-family houses during the first eight months of the year were up 31 percent, compared with last year, and that apartments represented more than half of all planned units during the month.

And the latest data from the Minneapolis Area Association of Realtors show that sales of new homes increased 21 percent during September, twice the pace of existing homes.

James Zeumer, head of investor relations for PulteGroup Inc., the state’s second-largest homebuilder, expects the impact of higher rates to vary across consumer segments. For first-time buyers, a half-percentage-point rise in interest rates means “there will be some of them that will be out of the game,” he said, while the move-up buyers “have a little bit more flexibility.”


Bloomberg News contributed to this report.