The Commerce Department said Wednesday that home construction rose 15 percent last month to a seasonally adjusted annual rate of 872,000. Single-family construction rose 11 percent to the fastest rate in four years. Apartment building increased 25.1 percent.
Applications for building permits, a sign of future construction, jumped nearly 12 percent to an annual rate of 894,000, also the highest since July 2008.
"If there was any doubt that the housing market was undergoing a recovery, even a modest one in the face of the terrible 2008 decline, those doubts should be erased by now," said Dan Greenhaus, chief global strategist at BTIG.
The construction rate has increased by more than 38 percent over the past 12 months.
Housing starts are now 82.5 percent above the recession low rate of 478,000 hit in April 2009. That's still well short of the 1.5 million that economists consider healthy and far below the more than 2 million built in 2007 - the peak of the housing boom. But the steady upward trend suggests builders believe the housing rebound is durable.
"This is a good report," said Patrick Newport, U.S. economist at HIS Global Insight. "It is telling us that the housing market is improving and there is no reason to think that this will not continue going forward."
Record-low mortgage rates, stable price increases and a limited supply of previously occupied homes have made newly built homes more attractive to buyers. Builder confidence is at a six-year high, according to a survey released Tuesday by the National Association of Home Builders. And the Federal Reserve's aggressive policies could push long-term interest rates even lower, making home-buying affordable for the foreseeable future.
Newport said housing starts should total 750,000 for the year. He expects starts will climb to 950,000 next year and 1.27 million in 2014. By 2015, he said home construction should reach more than 1.5 million.
He also predicts that housing will add about 0.25 percent to overall economic growth this year. If that forecast proves accurate, it will be the first year that housing has been a positive factor for economic growth in five years.
"The rest of the economy is still struggling but housing is doing better because as the population grows, we need new houses to meet that demand," Newport said.
Sales of new homes were up nearly 28 percent in August compared with the same month last year. Even with the gains, sales remain near depressed levels. Economists say more jobs and better pay are needed to help accelerate sales.
Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the home builders group.
Construction activity rose in three of the nation's four regions. The biggest increases came in the West and South. Housing starts increased by nearly 20 percent in both regions. Construction of new homes and apartments rose 6.7 percent in the Midwest. Housing starts fell 5.1 percent in the Northeast.