Multifamily construction starts spiked in August by 28% compared with July, to an annualized rate of 640,000 units, as part of a larger growth in residential starts, according to Census Bureau data.

The multifamily start rate is the highest since April 1986.

Overall, residential starts were up 12.2% for the month, to an annualized 1.58 million units.

On the other hand, permits for new residential construction, which is considered a reflection of the direction of the market, dropped to an annualized 1.52 million units in August, the bureau reported. That is the lowest total for that metric since June 2020.

For the month, permits for multifamily construction were down 18.5%, while single-family permits were down 3.5%.

Single-family construction starts were also up for the month, though less dramatically, rising 3.4%, to an annualized rate of 935,000 units. The growth for single-family starts came despite headwinds for the housing market, including rising interest rates and overall economic uncertainty.

"Home builders continue to moderate their production levels as the cost of construction materials remains at elevated levels and buyers react to rising mortgage rates,” RCLCO Real Estate Consulting's Kelly Mangold said in a note, as reported by Bloomberg.

Interest rate hikes are likely to continue as the Federal Reserve convenes for its September meeting Wednesday, with an anticipated increase in the base rate of at least 75 basis points.

Homebuilder sentiment lately has reflected these industry woes. The NAHB/Wells Fargo Housing Market Index, which is based on a monthly survey of National Association of Homebuilders members, fell three points to 46 in June. Anything above 50 means a majority of those surveyed feel positive about the market; below 50 is a negative sentiment. The index hit 90 as recently as the end of 2020.