US home construction started in July surged 22.6 percent compared to June, the Commerce Department said Tuesday, as the sector continued to expand at a frenzied pace despite the coronavirus pandemic.

The vast majority of the increase came in apartment buildings which exploded by nearly 57 percent, with the South and Northeast showing the largest gains, according to the report.

Single family homes started in the month rose just 8.2 percent, the report said.

The increase put housing starts at a 1.5 million annual rate, seasonally adjusted, far higher than the modest gain economists had been expecting, as builders take advantage of extremely low interest rates and the pent-up demand for homes.

US home construction surged in July, with apartment buildings jumping nearly 57 percent US home construction surged in July, with apartment buildings jumping nearly 57 percent Photo: GETTY IMAGES NORTH AMERICA / AL BELLO

The dramatic gain last month came on top of the surge in June to a 1.22 million annual rate, revised up from the 1.19 million initially reported.

And more construction is in the pipeline, as building permits issued jumped another 18.8 percent compared to the prior month, the report said, with double-digit increases in permits for single-family and multi-unit homes.

Prior to the pandemic, home sales prices were rising given strong demand, and after the central bank slashed the benchmark interest rate to zero, low mortgage costs have spurred a fresh rush of homebuyers and boosted confidence of builders.

"Homebuyer demand remains robust, inventories are tight, and there is a need for new units to keep the pace of sales going," said Mike Fratantoni, chief economist at the Mortgage Bankers Association. "Housing is certainly one of the bright spots in the struggling economy."