New U.S. home construction unexpectedly surged in August, but a decline in building permits underscores how rising interest rates are continuing to cool overall demand for housing. Housing starts climbed 12.2% last month to an annual rate of 1.575 million units, according to new Commerce Department data released on Tuesday. That’s above Refinitiv economists’ forecast for a pace of 1.445 million units. The increase stemmed from a jump in multi-family housing construction, evidence that rising borrowing costs combined with steep home prices are pushing potential homebuyers out of the market. Applications to build – which measures future construction – slowed to an annual rate of 1.52 million units, which is the lowest since June 2020. …The interest rate-sensitive housing market has started to cool noticeably in recent months as the Federal Reserve moves to tighten policy at the fastest pace in three decades.