WASHINGTON (AP) — The pace of U.S. home construction jumped 12.3% last month to a 12-year high on a surge in apartment building.

The Commerce Department said Wednesday that housing starts came in at a seasonally adjusted annual rate of 1.36 million, the most since June 2007 and up from a revised 1.22 million, as builders overcame a shortage of skilled workers and available land.

Economists had expected a more modest gain and in another promising sign, permits, a signal of future building, rose 7.7% to 1.42 million, highest since May 2007.

Construction of single-family homes rose 4.4% to 919,000. Building of apartments and condominiums surged 30.9% —biggest monthly gain since December 2016 — to 424,000.

Residential construction rose 30.5% in the Northeast, 15.4% in the Midwest and 14.9% in the South but was unchanged in the West.

Demand for housing has been strong, supported by a healthy economy and job market. But construction has been constrained by a shortage of land and labor.

“For some time, all the stars have been aligned on the demand side for new home construction: unemployment is very low, mortgage rates have fallen significantly, and we’ve seen solid gains in wages,” Leslie Preston, senior economist at TD Economics, wrote in a research note. “In August, we finally started to see a more encouraging response on the supply side …. New home construction has long been an area of disappointment in the domestic economy, but today’s data provides some hope that things may be looking up for the sector.”

Housing could soon get additional help from even cheaper credit.

The Federal Reserve is expected to cut interest rates Wednesday for the second time this year. The Fed is hoping to extend a record-breaking U.S. economic expansion imperiled by President Donald Trump’s trade war with China and factors ranging from heightened tension in the Persian Gulf to a strike at General Motors.