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Homebuilders in the Twin Cities on Friday finished their best month in more than a decade.

During June, 634 permits were issued to build 997 houses and rental apartments, according to a midyear report from the Builders Association of the Twin Cities. That’s an 11 percent increase in permits and a nearly 63 percent increase in planned units.

At the current pace, housing construction in 2017 is likely to outperform 2016.

“With another great month in permit activity we are on pace to have by far our best year since 2007,” Bob Michels, president of the association, said in a statement.

In addition to steady gains in apartment construction, homebuilders have been seeing relatively strong demand for big single-family houses in the suburbs.

So far this year, homebuilders have been issued 2,962 permits to build 6,352 units. That’s a 64 percent increase in new units compared with the same six-month period last year.

Multifamily typically represents about half of all planned units during a given month, but with so many houses on the docket, those attached units accounted for just 39 percent of all planned units in June.

During all of the recovery, rental apartments have vastly outnumbered for-sale houses, but that situation is changing dramatically. The supply of active house listings has fallen dramatically. At the current sale pace, there are now only enough houses on the market to last a couple months, according to the Minneapolis Area Association of Realtors. A three- to five-month supply of listings is needed to have what’s considered a balanced market.

During June alone, builders planned to build 612 single-family houses and 385 multifamily units. That was the most single-family houses during any month since January 2006, and there’s enough demand to support even more new houses, especially those affordable to first-time and moderate-income buyers.

“The first step to homeownership, the entry-level home, is in short supply. Homebuilders are finding ways to fill that gap,” Michels said.

Recent changes to the state’s construction defect laws are expected to stimulate construction of townhouses and condominiums. “With new legislation that solves some of the barriers that have put a damper on town home and condo development, we should see an increase in construction of these common entry-level homes,” Michels said.

While housing construction is cyclical — May and June are typically the busiest months for single-family construction — apartment construction can vary dramatically from month to month. June was no exception. The number of planned multifamily units this month was far higher because several large projects broke ground.

That includes a mixed-use project that’s being developed by Sherman Associates and built by Frana Cos. in the East Town neighborhood near U.S. Bank Stadium. That project includes 180 apartments atop a Trader Joe’s store at the corner of Washington and Chicago avenues.

Reuter Walton Commercial pulled a permit to build a 71-unit rental project in Minneapolis. And in Blaine, Kason Inc. is building a 36-unit building that will be part of a three-phase, 112-unit rental project.

Mary Bujold of Maxfield Research said that because so many projects were delayed by issues with materials, or are being built in phases like the project in Blaine, she expects to see at least a slight increase in apartment deliveries next year.

“It will be a little higher than last year, but not by that much,” she said.

During June, for all types of residential construction, Minneapolis was the busiest metro city with 12 permits to build 287 units; Blaine was second with 72 units and Lakeville issued enough permits to build 65 units.

Hot market nationally

With inventory levels low, the economy performing well and mortgage interest rates still near record lows, new home sales across the country are on the rise.

On Thursday, Freddie Mac said that the average rate for a 30-year fixed-rate mortgage had fallen to 3.88 percent, a new low for the year. And earlier in the week, the U.S. Census Bureau said that there was a 2.9 percent increase in the number of signed purchase agreements, bringing the total to a seasonally adjusted 610,000 annual rate.

The report also included a strong upward revision for the April rate of sales. While the report reflected a positive trend for builders, it showed a heady gain in the price of new homes. During May, the median price of all new homes was nearly $350,000, a new high, according to the Census Bureau.

David Siegel, executive director of Housing First Minnesota, said in a statement that the association is focusing its efforts on helping builders deliver more affordable homes.

“Builders would like nothing more than to construct more affordable homes,” he said. “But there are several factors pushing against market-based affordable housing, including regulations and the increasing labor shortage.”

Jim Buchta • 612-673-7376