Jul 17, 2015 3 min read

WASHINGTON – U.S. builders broke ground on apartment complexes last month at the fastest pace in nearly 28 years, as developers anticipate that recent jobs gains will launch a wave of renters.

The Commerce Department said Friday housing starts in June climbed 9.8 percent to a seasonally adjusted annual rate of 1.17 million homes. Growth came from a 28.6 percent surge in multifamily housing that put apartment construction at its highest rate since November 1987.

Starts for single-family houses slipped 0.9 percent last month.

The gains show what was a sluggish construction sector is now running on economic adrenaline. Strong job growth and a rebounding economy increased the numbers of buyers and renters searching for homes, while gradually rising mortgage rates spurred homeowners to finalize deals.

“The residential market recovery is here, and it is strong and sustainable,” said Peter Ciganik, managing director at real estate investor GTIS Partners.

Housing starts jumped 35.3 percent in the Northeast because of apartments, while climbing 13.5 percent in the South. Home construction slumped in the Midwest and West in June.

Nationwide, housing starts have risen 10.9 percent year to date.

Over the past 12 months, employers added 2.9 million jobs, meaning there are more people with paychecks to spend across the broader economy. The impact of those job gains and the unemployment rate dropping to 5.3 percent surfaced in housing, where demand is outpacing the supply of homes and creating more pressure to build houses and apartments.

The market for new homes for sale had just 4.5 months of supply in May, compared with six months in a healthy market.

But the financial distress also left more Americans renting instead of owning, creating more need for apartments. The share of Americans owning homes fell this year to a seasonally adjusted 63.8 percent, the lowest level since 1989.

Approved building permits increased 7.4 percent to an annual rate of 1.34 million in June, the highest level since July 2007. The bulk of that increase came for apartment complexes, while permits for houses last month rose just 0.9 percent.

There are other signs builders are increasingly optimistic.

The National Association of Home Builders/Wells Fargo builder sentiment index, released Thursday, climbed to 60, a level last reached in November 2005. That was shortly before the housing boom gave way to the mortgage crisis that triggered the Great Recession. Readings above 50 indicate more builders view sales conditions as good rather than poor.

Mortgage rates started to rise, although they remain low by historic standards.

The average 30-year, fixed mortgage rate was 4.09 percent last week, according to the mortgage firm Freddie Mac. That is up from a 52-week low of 3.59 percent.