U.S. housing starts increased in June by more than forecast, suggesting residential construction is stabilizing despite lingering supply-chain constraints and labor shortages.

Initial home construction rose 6.3% last month to a 1.64 million annualized rate, a three-month high, according to government data released Tuesday. The median estimate in a Bloomberg survey called for a 1.59 million pace.

Still, applications to build, a proxy for future construction, fell to an annualized 1.6 million units in June. That’s the lowest since October and suggests a more moderate pace of homebuilding in coming months.

Exorbitant materials costs, combined with shortages of land and labor, have thwarted developers seeking to ramp up construction. Supply concerns and a slowdown in sales pushed builder confidence down to an 11-month low in July, a survey from the National Association of Home Builders showed Monday.

An inventory crunch that followed solid demand last year has sent prices soaring, tempering buyer interest. A record 71% of consumers said higher prices were a reason why buying conditions have deteriorated, according to July data from the University of Michigan.

The government’s report showed the number of single-family homes started increased 6.3% in June to a 1.16 million pace, the fastest since March. Beginning multifamily home construction climbed 6.2% to the highest since July 2020.

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The number of one-family homes authorized for construction but not yet started — a measure of backlogs — rose to 144,000 in June, the highest since October 2006 and suggesting a robust pipeline for builders. At the same time, permit applications for single-family home construction dropped to a 10-month low.

By region, housing starts rose in the South and West. In the Northeast, single-family home construction soared more than 34% from the prior month.

Meanwhile, housing completions in June fell to a 1.32 million annualized rate, a seven-month low, underscoring the difficulty builders are having finding materials and labor.