Despite rising mortgage rates and a dismal start to the fall, homebuilders in the Twin Cities are picking up the pace.

So far this month builders were issued 495 permits to build 852 units, according to data compiled by the Keystone Report for Housing First Minnesota.

Of those totals, builders were issued 467 permits to build free-standing, single-family houses, 4 percent more than the comparable four weeks last year and more than half of all planned units.

That gain comes after a disappointing September for builders, who are struggling to meet growing demand at a time of rising prices for land, labor and materials.

"Price remains a barrier for many buyers" said Tom Wiener, president of Housing First Minnesota, in a statement. "The concern is that the growing labor shortage and increasing construction costs will hold back home buyers going forward."

This fall, builders have a new challenge: rising mortgage rates. On Thursday, Freddie Mac said that after a brief dip, mortgage rates increased slightly this week. For the week ending Oct. 25, the average 30-year fixed-rate mortgage increased 1 basis point to 4.86 percent, up from 4.85 percent during the previous week and 3.94 percent a year ago.

Though those rates are still the lowest in a generation and below historic averages, rising rates are expected to put downward pressure on homebuying activity at a time when sales typically slow. The upside for buyers this fall and winter is decreased competition.

For most of the past decade apartments have dominated the construction industry, but plans to build large multifamily projects, mostly upscale rental apartments, slowed slightly. Builders were issued permits to build 291 units, a 32 percent decrease from 2017.

The biggest apartment projects permitted during the month include a 114-unit building that's being built by Bigos-Nuvelo LLC in Apple Valley and a 100-unit building being built by Frana Cos. in Edina. Doran Construction is building a 77-unit project in Minnetonka.

With house listings in short supply, buyers have increasingly turned to builders. Given the high cost of construction, builders have had a difficult time meeting demand for houses that are affordable for first-time buyers.

Increasingly, they are turning to attached for-sale housing, which tends to be less expensive because units occupy less land and are typically smaller than a free-standing house.

During October builders were issued 25 permits to build attached housing, a 25 percent increase over last year.

So far this year housing construction is only slightly behind 2017. During the first 10 months of the year builders were issued permits to build 4,880 single-family houses, just 15 shy of last year.

For the month, Lakeville took the top spot with 38 permits. Plymouth came in next with 29 permits, followed by Woodbury with 25 permits.

Home sales and construction activity in the Twin Cities have been far more stable than the rest of the country. New reports released this week show that pending home sales rose slightly in September with substantial increases in both the West and Midwest, according to the National Association of Realtors.

But according to a report released Thursday by the U.S. Census Bureau, sales of new homes across the country during September fell 5.5 percent. After making several downward revisions for sales during the previous months, sales have now fallen for five out of the last six months.

"The housing affordability problem continues to grow," said David Siegel, executive director of Housing First Minnesota. "Interest rates, labor costs and material costs are all on the rise."

Jim Buchta • 612-673-7376