The August performance was another sign that the U.S. housing industry has begun to recover from its worst downturn in decades.
The Commerce Department said Thursday that construction of new homes and apartments rose 1.5 percent to an annual rate of 598,000 units last month. That is slightly lower than the 600,000-unit pace that economists had forecast.
The increase pushed building activity to the highest level since last November and left home construction 24.8 percent above the record low hit back in April.
Applications for building permits, a good forecaster of future activity, posted a 2.7 percent rise in August to an annual rate of 579,000 units, slightly below the 580,000 level that had been forecast. Permits for single-family homes dipped by 0.2 percent while multifamily units rose by 15.8 percent.
The 1.5 percent rise in housing starts followed a small 0.2 percent dip in July. The August strength came from a 25.3 percent surge in construction of multifamily units, a volatile sector which had fallen by 15.2 percent in July.
The larger single-family sector dipped by 3 percent last month to an annual rate of 479,000 units, the first setback following five straight monthly gains.
By region of the country, construction shot up by 23.8 percent in the Northeast and 0.9 percent in the Midwest. Activity was flat in the West and fell by 2.4 percent in the South.
Builders slammed the brakes on construction after the housing bubble burst following five consecutive boom years. The weakness in housing spread to the financial sector as defaults on home mortgages soared. This all contributed to pushing the country into the worst recession in seven decades. Economists believe the overall downturn has ended as well.
Builders have been ramping up because buyers want to take advantage of a new federal tax credit for first-time homebuyers. It covers 10 percent of a home price up to $8,000, and is set to expire at the end of November.
The National Association of Home Builders said Wednesday its housing market index rose in September, reflecting growing optimism in the industry about rising home sales. The trade association said its index rose one point to 19, the highest reading since April 2008.