Apartments continued to dominate housing construction in the Twin Cities this month, and plans to build single-family houses far exceeded last year’s pace despite a recent rise in mortgage rates.

During August, metro area homebuilders were issued 494 permits to build 1,114 units, according to data compiled by the Keystone Report for the Builders Association of the Twin Cities. That’s a 28 percent increase in permits, and a 24 percent increase in units, over the same month last year.

Multifamily housing, mostly luxury rental apartments, represented more than half of all new units planned for the coming months, though with rates on the rise and inventories of new and existing houses getting tighter, builders are seeing significant increases in demand for new houses.

“Because mortgage rates and prices have started to rise, our builders expect to see some additional sales from buyers trying to beat future increases,” said Pamela Belz, Builders Association of the Twin Cities 2013 president and developer with Senior Housing Partners.

So far this year, 3,315 single-family homes have been permitted, a 31 percent increase over 2012. Apartment developers are busier than they’ve been in years. Year-to-date multifamily construction is ahead of last year by 17 percent, with permits issued to build 2,761 units.

“We’re leasing on-schedule,” said Susan Picotte, director of real estate for Greystar, an Atlanta-based housing developer that just opened its first new project in the Uptown neighborhood of south Minneapolis.

She said demand is still strong even though thousands of new units already have hit the market, and that has enabled Greystar to increase rents anywhere from 4.9 to 10 percent. Greystar owns and manages seven properties in Minnesota, including the new Elan Uptown, which is being opened in two phases.

“I can look out off the rooftop and see three other projects under construction within a stone’s throw; it’s become a highly competitive market,” Picotte said.

The Uptown and North Loop neighborhoods in Minneapolis have been the epicenters of apartment construction in the city.

The apartment boom is a reflection of a general housing shortage in the Twin Cities, and a decline in the home-ownership rate as more people seek the flexibility of renting.

Across the seven-county metro, the average vacancy rate dipped to 2.3 percent at the end of June, causing the average metro rent price to increase 3 percent to $979, according to a recent second-quarter survey by Marquette Advisors. That was the largest quarterly decline in vacancy rates in two years, and the ninth consecutive quarter of vacancy rates below 3 percent.

A key indicator of future construction also released Friday suggested strong demand for at least the next few months. The Architecture Billings Index for July increased more than a full point, indicating that design activity is on the rise across the country. Chief economist Kermit Baker of the American Institute of Architects said the Billings Index helps forecast what will get built over the next nine to 12 months.

“There continues to be encouraging signs that the design and construction industry continues to improve,” he said.

Homebuilders say there’s been a wave of buyers who are either stymied in their attempts to find a suitable existing home or are fast-tracking their purchase to avoid higher mortgage interest rates.

Freddie Mac’s weekly mortgage rate survey, released Thursday, shows that rates continue to be turbulent. For the week ending Aug. 29, rates fell slightly, with the average 30-year fixed-rate mortgage falling to 4.51 percent from 4.58 percent the previous week.

Jim Buchta • 612-673-7376