Higher mortgage rates haven't put a chill on home building this summer.

Builders in the Twin Cities area pulled 571 single-family permits during August, 66% more than last year at this time, according to Housing First Minnesota, a trade group that represents metro area builders.

"New construction continues to attract eager buyers due to lack of supply in the existing market paired with the ability to offer opportunities other sectors of the market can't," said John Quinlivan, 2023 board chair of Housing First Minnesota.

After a slow start to the year, housing construction in the Twin Cities this summer is outpacing last year as builders try to capitalize on a steep decline in for-sale listings of previously owned homes.

Listings for previously owned homes were down 24% during July, but listings for newly built homes were up 7%, according to the latest data available from the Minneapolis Area Realtors association.

And while higher mortgage rates and a shortage of listings are stifling home sales across the board, new home sales are down by a much smaller margin, likely a reflection of greater supply.

Pending sales of existing homes were down 26% during July, while pending sales of new home were down only 8%, according to a rolling 12-month average.

"Interest rates are having impacts across all areas of the housing market," Quinlivan said.

Mortgage rates are now hovering at around 7%, the highest in a couple decades but near historic averages. But after several incremental increases through the past month, mortgage rates slipped slightly going into the Labor Day holiday.

On Thursday, Freddie Mac's weekly survey showed the 30-year fixed-rate mortgage (FRM) averaged 7.18%. That was down from 7.23% during the prior week. A year ago, the average was 5.66%,

"Despite continued high rates, low inventory is keeping house prices steady," Sam Khater, Freddie Mac's chief economist, said in a statement. "Recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes."

Apartment construction continues to decline with the number of permitted units for multi-family housing — mostly market-rate rentals — down 13%.

The largest project permitted last month was a 148-unit apartment building in Cambridge from BJ Baas Builders. That project made Cambridge the city with the most total units for the month. But with nearly 1,000 units in the pipeline, Minneapolis will have the most new housing so far this year.

Despite the gains in single-family and multi-family construction last month, 6,652 units have earned permits so far this year. That's nearly half as many as last year at the same time.