U.S. homebuilding rebounded less than expected from a nine-month low in July, suggesting the housing market was likely to tread water for the rest of this year against the backdrop of rising mortgage rates.

Housing starts rose 0.9 percent to a seasonally adjusted annual rate of 1.168 million units last month, the Commerce Department said on Thursday. Data for June was revised down to show starts declining to a 1.158 million-unit rate, the lowest level since September 2017, instead of the previously reported 1.173 million-unit pace.

Starts rose in the Midwest and South, but dropped in the Northeast and West. Last month's increase in groundbreaking activity left the bulk of June's 12.9 percent plunge intact. Building permits increased 1.5 percent to a rate of 1.311 million units, snapping three straight months of decreases.

Economists polled by Reuters had forecast housing starts rising to a pace of 1.260 million units last month and permits increasing to a rate of 1.310 million units.

The housing market has underperformed a robust economy, with economists blaming the slowdown on rising mortgage rates, which have combined with higher house prices to make home purchasing unaffordable for some first-time buyers.

The 30-year fixed mortgage rate has risen about 60 basis points this year to an average of 4.59 percent, according to data from mortgage finance agency Freddie Mac. While that is still low by historical standards, the rise has outpaced annual wage growth, which has been stuck below 3 percent.