New US home construction rose in July on strength in single-family projects amid limited supply in the resale market.

Residential starts increased 3.9% last month to a 1.45 million annualized rate, according to government data released Wednesday, matching the median estimate in a Bloomberg survey of economists. Single-family homebuilding rose 6.7%.

Applications to build, a proxy for future construction, ticked up 0.1% to an annualized pace of 1.44 million units. Permits to build one-family homes rose to the highest in more than a year.

Homebuilders are working around the clock to break ground as limited availability in the resale market continues to tilt prospective buyers toward new construction. That said, the outlook for the overall housing market remains shaky amid growing uncertainty in the economy.

Mortgage rates are back on the rise as it becomes clearer the Federal Reserve is planning to keep interest rates higher for longer to ensure inflation returns to its 2% target. That contributed to the first decline in homebuilder sentiment this year, according to a monthly report published Tuesday.

Read More: US Mortgage Rate Climbs to 7.16%, Matching Highest Since 2001

Multifamily construction fell 1.7%, to the lowest level since September 2021. Applications for those projects also declined.

On a regional basis, starts in the West rose to the highest level since April 2022. They also increased in the Northeast and the Midwest, while the South saw a decline.

Data on both existing- and new-home sales due later this month will provide further clues about the outlook for the US housing market.

--With assistance from Jordan Yadoo and Reade Pickert.

(Updates with scope on multifamily decline in sixth paragraph.)