Residential construction activity in the US has jumped in December 2016, due to the demand for more apartments. Meanwhile, construction of single-family homes has lagged.

According to a report by the Commerce Department, housing starts last month have increased 11.3% to a seasonally adjusted annual rate of 1.2 million, from a significantly lower number in November. In the area of apartment construction, it soared 53.9%, while that of single-family houses fell 4%. But overall, the figures indicated a solid 2016 for home construction.

The report also stated that there was an increase in mortgage rates, wage gains, and steady job creation, which made it possible for more people to buy a house. But still, residential construction is said to face certain challenges this 2017 that could hinder further growth.

For example, there are signs that the Federal Reserve might continue to push up the short-term interest rates it controls. This means higher borrowing costs, higher property prices, and fewer choices in the coming months, especially with relatively a few homes on the market.

Building permits for apartment buildings have dropped 0.2% last month, which indicates slow activity in the coming months. Higher mortgage rates would also weigh on home purchases, with a fewer Americans signing contracts to buy their own homes.

According to Freddie Mac, in the second week of January, the average 30-year fixed rate mortgage fell to 4.12%, down from 4.2% in the first week. Nevertheless, these numbers are significantly higher than the 3.65% average rate for all of last year.