By Olivia Rockeman | Bloomberg

New U.S. home construction rose unexpectedly in March to the highest level since 2006, boosted by multifamily projects as builders seek to replenish housing inventory.

Residential starts climbed 0.3% last month to a 1.79 million annualized rate from an upwardly revised February figure, according to government data released Tuesday. Applications to build, a proxy for future construction, climbed to an annualized 1.87 million units.

The median estimate in a Bloomberg survey of economists called for a 1.74 million pace of housing starts.

The increase in starts reflected the strongest pace of multifamily home construction since January 2020. Starts of single-family dwellings eased slightly to an annualized 1.2 million, which remains elevated and well above pre-pandemic levels.

The figures also showed builders are still faced with large backlogs that reflect supply chain difficulties, high materials costs and lingering shortages of skilled labor. At the same time, mortgage rates above 5% for the first time since 2018 are putting purchases out of reach for a growing number of potential buyers.

Multifamily starts — which tend to be volatile and include apartment buildings and condominiums — increased to 593,000 in March.

Under construction

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The number of total homes authorized for construction but not yet started rose 2.9% in March, while the number of one-family homes authorized but not yet started was little changed at 149,000.

The number of single-family properties under construction continued to climb, reaching 811,000 — the most since 2006. Such a backlog points to a robust pipeline of work for builders in the months ahead.

While builder sentiment dropped to a seven-month low in April, according to the National Association of Home Builders/Wells Fargo figures on Monday, the group’s gauge remains above pre-pandemic levels.